World Development Report 1986 PUB6134 The Hesitant Recovery and Prospects for Sustained Growth Trade and Pricing Policies in World Agriculture World Development Indicators World Development Report 1986 Published for The World Bank Oxford University Press Oxford University Press NEW YORK OXFORD LONDON GLASGOW TORONTO MELBOURNE WELLINGTON HONG KONG TOKYO KUALA LUMPUR SINGAPORE JAKARFA DELHI BOMBAY CALCUrFA MADRAS KARACHI NAIROBI OAR ES SALAAM CAPE TOWN © 1986 by the International Bank for Reconstruction and Development / The World Bank 1818H Street, N.W, Washington, D.C. 20433 U.S.A. First printing July 1986 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Manufactured in the United States of America. The denominations, the classifications, the boundaries, and the colors used in maps in World Development Report do not imply on the part of The World Bank and its affiliates any judgment on the legal or other status of any territory, or any endorsement or acceptance of any boundary. ISBN 0-19-520517-0 clothbound ISBN 0-19-520518-9 paperback ISSN 0163-5085 The Library of Congress has cataloged this serial publication as follows: World development report. 1978- (New Yorki Oxford University Press. v. 27 cm. annual. Published for The World Bank. 1. Underdeveloped areasPeriodicals. 2. Economic development Periodicals I. International Bank for Reconstruction and Development. HC59. 7. W659 330.9 '172 '4 78-67086 This book is printed on paper that adheres to the American National Standard for Permanence of Paper for Printed Library Materials, Z39.48-1984. Foreword This Report is the ninth in the annual series assess- of the decade weighed down by the cumulative ing development issues. Part I reviews recent effects of domestic policies, large foreign debt obli- trends in the world economy and the policy frame- gations, and, in the case of oil exporters, the recent work required for sustained growth. Part II is de- decline in export earnings. Continued domestic voted to trade and pricing policies in world agricul- policy reforms, designed to restore and maintain a ture. As in the past, the Report includes an stable macroeconomic environment and to im- updated World Development Indicators annex, prove the incentive structure, are stressed as the which provides selected social and economic data prerequisites for growth. Increased reliance on in- for more than a hundred countries. ternational trade will be a necessary component of The world economy is entering its fourth consec- this reform process. Policy reforms in developing utive year of growth since the 1980-82 recession. countries, however, will need to be supported by Yet the recovery continues to be hesitant, and reductions in trade barriers and increases in net many developing countries are facing serious flows of foreign capital. problems of adjustment. Although the recent de- Part II of this Report develops these themes in clines in oil prices, real interest rates, and inflation the context of agricultural policies. It examines the will provide a useful stimulus to industrial and de- policies of developing and industrial countries in veloping countries alike, many heavily indebted an integrated framework, bringing out the interde- developing countries, particularly oil exporters, pendence of domestic agricultural policies will find it difficult to maintain growth in the near throughout the world and the potential for large term. In addition, the beneficial effects of the re- gains from more liberal trade in agriculture. It sug- covery have been much weaker for many low- gests that liberalization of trade should be a high income sub-Saharan African countries. priority for international action in agriculture. Part I of this year's Report explores the policies An examination of the policy options for devel- required to restore sustained growth in the world oping countries suggests that economic stability economy. It stresses the importance of maintaining and growth would be greatly enhanced if pricing the commitment of industrial countries to policies and trade policies were improved. In many devel- that have both reduced inflation and moderated oping countries, both macro- and microeconomic market distortions and rigidities. A recurring con- policies have hindered agricultural development. cern, however, is the increase in international Overvalued exchange rates, the protection pro- trade restrictions. If high and sustainable growth is vided to domestic manufacturing activities, and to be attained, the reform of domestic institutions the taxation of agricultural exports and import- and incentives needs to be accompanied by a re- competing food crops have discouraged domestic newed effort to move toward freer international agricultural production. In addition, programs for trade. The progress that developing countries have subsidizing consumers and farm inputs and for made in reforming their policies and adjusting to stabilizing consumer and producer prices have of- the rapid, and often large, changes in the world ten led to significant losses in the real national in- economy since 1980 is charted. Despite consider- comes of developing countries. These problems, able progress, many of them enter the second half however, are being increasingly acknowledged, in and some developing countries have initiated Like its predecessors, this Report is a study by significantin some cases sweepingpolicy re- the staff of The World Bank, and the judgments in forms. it do not necessarily reflect the views of our Board Agricultural policy reforms are also under seri- of Directors or of the governments they represent. ous consideration in many industrial countries. The policies they have pursued in the past several decades have limited trade opportunities for devel- oping countries and have been counterproductive for themselves as well. As preparations are made for the next round of GAIT negotiations, it is well to recognize the opportunities that exist for bring- ing about a more efficient world agricultural systema system which will benefit both indus- A. W. Clausen trial and developing countries. The progress that President has been achieved in agricultural technology The World Bank presents an opportunity for a rapid expansion of agricultural output if more open and competitive world markets are established. May 19, 1986 This Report was prepared by a team led by Anandarup Ray and comprising Trent Bertrand, Ajay Chhibber, Bruce Gardner, Orsalia Kalantzopoulos, Odin Knudsen, Donald 0. Mitchell, Alan Walters, John Wilton, and L. Alan Winters, assisted by Therese Belot, Zohreh Hedjazi, M. Shahbaz Khan, Donald F. Larson, Tani Maher, Yasmin Saadat, Rodney Smith, and Robert Wieland. D. Gale Johnson, Ulrich Koester, and many others in and outside the Bank provided helpful comments and contribu- tions (see the bibliographical note). The Economic Analysis and Projections Department, under the direction of Jean Baneth, supported the work on Part I, and Enzo Grilli, Peter Miovic, and Heywood Fleisig coordinated the work of that department on projections. Ramesh Chander, assisted by David Cieslikowski, also of that department, supervised the preparation of the World Development Indica- tors; Elizabeth Crayford edited the Indicators, and Shaida Badiee was responsible for systems design. Special thanks also go to the production staff, especially Joyce Eisen, Pensri Kimpitak, and Victoria Lee, and to the support staff, headed by Rhoda Blade-Charest and including Banjonglak Duangrat, Jaunianne Fawkes, Carlina Jones, and Patricia Smith. The work was carried out under the general direction of Anne 0. Krueger and Constantine Michalopoulos, with John Parker as the editorial adviser. iv Contents Definitions and data notes ix Acronyms and initials x 1 Introduction 1 Prospects for the world economy 1 Trade and pricing policies in world agriculture 3 Part I The Hesitant Recovery and Prospects for Sustained Growth 2 The hesitant recovery 15 The industrial countries 16 The developing countries 24 3 Opportunities for growth 40 Policies for growth in developing countries 40 A decade of opportunity, 1985-95 44 Policy requirements for the High case 45 Developing-country prospects 48 Capital flows and debt 55 International initiatives and the role of the Bank 58 Part II Trade and Pricing Policies in World Agriculture 4 Agricultural policies in developing countries: exchange rates, prices, and taxation 61 Economy-wide policies and agriculture 62 Agriculture as a source of tax revenues 80 5 Agricultural policies in developing countries: marketing and stabilization, subsidies, and policy reform 85 Marketing and stabilization 85 Consumer subsidies 90 Producer support programs 94 Policy reforms 104 6 Agricultural policies in industrial countries 110 The characteristics of agricultural policies 110 The domestic gains and losses from agricultural policies 119 International consequences 123 V 7 International initiatives in agricultural trade 133 International commodity agreements 133 Compensatory finance 137 Trade preferences 142 Food aid 145 8 National and international priorities in agriculture 149 Priorities in developing countries 149 Trade liberalization 151 The GAIT negotiations 152 The role of the World Bank 152 Statistical appendix 154 Bibliographical note 162 World Development Indicators 169 Text tables 1.1 Agriculture's share of GDP, employment, and exports, selected years, 1964-84 3 1.2 Agriculture's share of exports in developing countries, 1979-83 4 1.3 Growth of agricultural production by major commodity group, 1961-84 4 1.4 Growth of cereal production in selected developing countries, 1971-84 5 1.5 Real growth of commodity prices, 1950-84 7 1.6 Growth of world exports, 1965-84 10 1.7 Export shares of major agricultural commodity groups, 1961-63, 1982-84 10 2.1 Growth of real GNP in selected industrial countries, 1979-85 15 2.2 Budget balance as a percentage of GNP in seven major industrial countries, 1979-85 17 2.3 Current account balances and exchange rates in Germany, Japan, and the United States, 1981-85 19 2.4 Total public expenditure as a percentage of GDP in selected industrial countries, 1964-83 20 2.5 Share of imports subject to nontariff barriers in industrial-country markets, 1981 and 1984 23 2.6 Real growth of GDP, 1965-85 24 2.7 Change in export prices and in terms of trade, 1965-85 25 2.8 Growth of exports from developing countries, 1965-85 26 2.9 Growth, net investment, and capital-output ratio in twenty-four developing economies, 1960-84 27 2.10 Change in U.S. interest rates and the export prices of developing countries, 1978-85 32 2.11 Debt indicators for developing countries, 1980-85 32 2.12 New commitments to public and publicly guaranteed borrowers in developing countries, 1978-84 33 2.13 Current account balance in developing countries, 1980-85 36 2.14 Public and private long-term capital flows to developing countries, 1975 and 1980-85 37 3.1 Average performance of industrial and developing countries, 1965-95 44 3.2 Growth of GDP per capita, 1965-95 45 3.3 Change in trade in developing countries, 1965-95 48 3.4 Current account balance and its financing in developing countries, 1985 and 1995 56 3.5 Net financing flows to developing countries in selected years, 1980-95 56 4.1 Protection of agriculture compared with manufacturing in selected developing countries 62 4.2 Index of real exchange rates in selected African countries 67 4.3 Index of nominal and real protection coefficients for cereals and export crops in selected African countries, 1972-83 68 4.4 Summary of output responses to price changes 68 4.5 Growth in output and exports, and the export market shares of cocoa and palm oil in selected developing countries, 1961-84 73 vi 5.1 Price instability indices, 1964-84 86 5.2 Trends in bread prices and consumption and imports of wheat, selected years, 1969-81 92 5.3 Growth in production of selected commodities in China, 1957-84 105 5.4 Growth in yields of selected commodities in China, 1957-83 105 6.1 Nominal protection coefficients for producer and consumer prices of selected commodities in industrial countries, 1980-82 112 6.2 The frequency of application of various nontariff barriers in industrial countries, 1984 117 6.3 The market value of quotas in Ontario, Canada, 1984 118 6.4 The domestic efficiency loss from agricultural intervention in selected industrial countries 121 6.5 The annual domestic costs and benefits of agricultural protection to consumers, taxpayers, and producers in the EC, Japan, and the United States 121 6.6 Changes in export revenue, import costs, and efficiency gains for selected commodities of developing countries caused by a 50 percent decrease in OECD tariff rates, 1975-77 128 6.7 International price and trade effects of liberalization of selected commodity markets, 1985 129 6.8 Efficiency gains caused by liberalization of selected commodities, by country group, 1985 131 6.9 Effects of liberalization on price instability, 1985 131 7.1 Current international commodity agreements in agriculture 135 7.2 The principal beneficiaries of STABEX's grant elements, 1975-83 140 7.3 Characteristics of the CFF and STABEX 141 7.4 Food aid in cereals, 1971-83 146 8.1 World Bank lending for agricultural and rural development, by purpose and period 153 Appendix tables A.1 Population growth, 1965-85 and projected to 2000 154 A.2 Population and GNP per capita, 1980, and growth rates, 1965-85 154 A,3 GDP, 1980, and growth rates, 1965-85 155 A.4 Population and composition of GDP, selected years, 1965-85 155 A.5 GDP structure of production, selected years, 1965-84 156 A.6 Sector growth rates, 1965-84 156 A.7 Consumption, savings, and investment indicators, selected years, 1965-84 157 A.8 Growth of exports, 1965-85 158 A.9 Change in export prices and in terms of trade, 1965-85 159 A.10 Growth of long-term debt of developing countries, 1970-85 159 A.11 Savings, investment, and the current account balance, 1965-84 160 A.12 Composition of debt outstanding, 1970-84 161 Text figures 1.1 Trends in agricultural and food production, 1961-84 5 1.2 Grain yields in selected countries, 1965-84 6 1.3 Trends in U.S. real agricultural prices, selected years, 1800-1985 6 1.4 Trends in food trade and trade balance, 1961-84 11 1.5 Nominal protection coefficients 13 2.1 Growth rate of real GDP in developing and industrial countries, 1961-85 15 2.2 Growth, inflation, and unemployment rates in seven major industrial countries, 1965-85 16 2.3 Exchange rate misalignment and real GDP growth in twenty-four developing economies, 1960-83 31 2.4 Exchange rate instability and net investment in twenty-four developing economies, 1960-83 31 2.5 Debt rescheduling, 1979-85 38 4.1 Ratio of farmgate prices to border prices for selected commodities of developing countries in the late 1970s and early 1980s 64 4.2 Indices of real exchange rates and agricultural exports in Ghana, Nigeria, Brazil, and Chile, 1961-84 71 4.3 Production, consumption, and imports of cereals in sub-Saharan Africa, 1965-84 77 4.4 Average annual growth in agriculture and industry in developing countries, 1973-84 80 vii 5.1 Food subsidies as a percentage of total government expenditure in selected developing countries, 1973-83 90 6.1 Threshold and border prices for selected grains in the EC, 1968-84 115 6.2 Nominal protection coefficients and the income differential in selected industrial countries, 1980 123 6.3 Per capita feed utilization and maize prices in selected industrial regions, 1960-84 127 7.1 International commodity agreements: price ranges and prices 136 Boxes 1.1 Food security 8 1.2 Adam Smith on the causes of famine and the modern evidence 9 1.3 Agricultural protectionism in historical context 12 2.1 Inflationasatax 18 2.2 Protectionism: who pays? 22 2.3 Inconsistency in macroeconomic policymaking: the case of the Philippines, 1980-83 30 2.4 Reacting to a debt crisis 34 3.1 Multilateral trade negotiations and the GATT 46 3.2 How a drop in the price of oil affects developing countries 50 3.3 The sub-Saharan Africa debt problem 52 3.4 The debt overhang and the heavily indebted middle-income countries 54 4.1 Coffee prices and macroeconomic policies in Colombia 66 4.2 Flexible markets in Niger 69 4.3 Trade policies and agricultural performance: the case of Argentina 70 4.4 Oil and agriculture: Nigeria and Indonesia 72 4.5 Agricultural prices and marketing in Tanzania 74 4.6 Export taxation and monopoly power 76 4.7 Food self-sufficiency in Asia 78 4.8 Agricultural pricing policies and the environment: the case of Haiti 79 4.9 Agricultural taxation in Japan 81 4.10 The efficiency cost of export taxes 82 5.1 Risk aversion in agriculture 87 5.2 Food-grain buffer stocks and price stabilization in India 89 5.3 Papua New Guinea's buffer fund 91 5.4 Food subsidy reform in Sri Lanka 93 5.5 Targeting economic assistance in Tamil Nadu, India 94 5.6 Credit subsidies in Brazil 98 5.7 Improving rural financial markets in Indonesia 100 5.8 Rubber replanting programs in Thailand 102 5.9 Agricultural policy improvements in Bangladesh 106 5.10 Cotton sector reform in Sudan 108 6.1 Price support in the dairy industry 112 6.2 Protecting sugar producers 114 6.3 Land restrictions and part-time farming 116 6.4 Hidden subsidies: the Crow's Nest rates 120 6.5 Old wine in new bottles 122 6.6 Commodity prices, rent, and rates of return 124 6.7 Protection and agroprocessing 126 6.8 Simulation of liberalized agricultural policies 130 7.1 Recent commodity agreements in agriculture 136 7.2 Commodity futures and options 138 7.3 The Lomé Convention 140 7.4 The EC's Sugar Protocol 142 7.5 Agricultural trade among developing countries 144 7.6 Food aid institutions 145 7.7 The challenges of emergency food aid 147 Definitions and data notes The principal country groups used in the text of sia, Turkey, United Arab Emirates, Yemen Arab this Report and in the World Development Indica- Republic, and People's Democratic Republic of tors are defined as follows: Yemen. Developing countries are divided into: low- East Asia comprises all low- and middle- income economies, with 1984 gross national product income countries of East and Southeast Asia and (GNP) per person of less than $400; and middle- the Pacific, east of, and including, Burma, China, income economies, with 1984 GNP per person of and Mongolia. $400 or more. Middle-income countries are also di- South Asia includes Bangladesh, Bhutan, In- vided into oil exporters and oil importers, identified dia, Nepal, Pakistan, and Sri Lanka. below. Latin America and the Caribbean comprises all Middle-income oil exporters comprise Algeria, American and Caribbean countries south of the Angola, Cameroon, People's Republic of the United States. Congo, Ecuador, Arab Republic of Egypt, Gabon, Major borrowers are countries with disbursed Indonesia, Islamic Republic of Iran, Iraq, Malaysia, and outstanding debt estimated at more than $15 Mexico, Nigeria, Peru, Syrian Arab Republic, Trin- billion at the end of 1984 and comprise Argentina, idad and Tobago, Tunisia, and Venezuela. Brazil, Chile, Egypt, India, Indonesia, Israel, Re- Middle-income oil importers comprise all other public of Korea, Mexico, Turkey, Venezuela, and middle-income developing countries not classified Yugoslavia. as oil exporters. A subset, major exporters of man U- Economic and demographic terms are defined in the factures, comprises Argentina, Brazil, Greece, technical notes to the World Development Indica- Hong Kong, Israel, Republic of Korea, Philippines, tors. The Indicators use the country groupings Portugal, Singapore, South Africa, Thailand, and given above but include only countries with a pop- Yugoslavia. ulation of 1 million or more. High-income oil exporters (not included in devel- oping countries) comprise Bahrain, Brunei, Ku- Billion is 1,000 million. wait, Libya, Oman, Qatar, Saudi Arabia, and Tons are metric tons, equal to 1,000 kilograms, or United Arab Emirates. 2,204.6 pounds. Industrial market economies are the members of Growth rates are in real terms unless otherwise the Organisation for Economic Co-operation and stated. Growth rates for spans of years in tables Development, apart from Greece, Portugal, and cover the period from the beginning of the base Turkey, which are included among the middle- year to the end of the last year given. income developing economies. This group is com- Dollars are current U.S. dollars unless otherwise monly referred to in the text as industrial econo- specified. mies or industrial countries. The symbol .. in tables means "not available." East European nonmarket economies include the The symbol - in tables means "not applicable." following countries: Albania, Bulgaria, Czechoslo- vakia, German Democratic Republic, Hungary, Po- All tables and figures are based on World Bank land, Romania, and U.S.S.R. This group is some- data unless otherwise specified. times referred to as nonmarket economies. Data from secondary sources are not always Sub-Saha ran Africa comprises all thirty-nine de- available through 1984. The numbers in this World veloping African countries south of the Sahara, ex- Development Report shown for historical data may cluding South Africa, as given in Toward Sustained differ from those shown in previous Reports be- Development in Sub-Saha ran Africa: A Joint Program of cause of continuous updating as better data be- Action (World Bank 1984). come available and because of recompilation of Middle East and North Africa includes Afghani- certain data for a ninety-country sample. The re- stan, Algeria, Arab Republic of Egypt, Iran, Iraq, compilation was necessary to permit greater flexi- Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, bility in regrouping countries for the purpose of Oman, Saudi Arabia, Syrian Arab Republic, Tuni- making projections. ix Acronyms and initials CIAT International Center for Tropical Agricul- GNP Gross national product. ture. IBRD International Bank for Reconstruction and CIMMYT International Maize and Wheat Im- Development. provement Center. IDA International Development Association. CFF Compensatory Financing Facility. IFC International Finance Corporation. DAC The Development Assistance Committee of IFPRI International Food Policy Research Insti- the Organisation for Economic Co-operation and tute. Development comprises Australia, Austria, Bel- IRRI International Rice Research Institute. gium, Canada, Denmark, Finland, France, Federal IMF International Monetary Fund. Republic of Germany, Ireland, Italy, Japan, Neth- LIBOR London interbank offered rate. erlands, New Zealand, Norway, Sweden, Switzer- ODA Official development assistance. land, United Kingdom, United States, and Com- OECD The Organisation for Economic Co- mission of the European Communities. operation and Development members are Austra- EC The European Communities comprise Bel- lia, Austria, Belgium, Canada, Denmark, Finland, gium, Denmark, France, Federal Republic of Ger- France, Federal Republic of Germany, Greece, Ice- many, Greece, Ireland, Italy, Luxembourg, Neth- land, Ireland, Italy, Japan, Luxembourg, Nether- erlands, Portugal, Spain, and United Kingdom. lands, New Zealand, Norway, Portugal, Spain, Greece joined the EC in 1981; Portugal and Spain Sweden, Switzerland, Turkey, United Kingdom, joined in 1986. and United States. ECU European currency unit. SDR Special drawing right. FAO Food and Agriculture Organization. UNCTAD United Nations Conference on Trade GATT General Agreement on Tariffs and Trade. and Development. GDP Gross domestic product. x Introduction Agriculture and economic growth are the subjects face a very difficult period of adjustment in the of this World Development Report. Because agricul- near term. For these countries, domestic policy re- ture accounts for a large share of many developing forms are necessary, but they are not sufficient: countries' economies, success there will play a access to additional external resources and export large role in determining the course of their na- markets will also be required. tional economies for decades to come. At the same Part II explores the connection between govern- time, policies that affect the national economy as a ment policy and agriculture and emphasizes the wholefor example, policies on exchange rates, interdependence of agricultural policies in differ- trade regimes, or government spendinginfluence ent parts of the world. Public policies in both de- the performance of the agricultural sector. Within a veloping and industrial countries greatly influence country and throughout the interdependent econ- the growth of agriculture and of rural incomes. omies of the world, better policies are needed to This influence often extends far beyond national improve the allocation of resources and raise real frontiers. What is perhaps most surprising is the incomes. In agriculture, using resources more effi- fact that it is the developing world which, on the ciently would involve removing both the policy- whole, discriminates against its farmers, even induced biases that generally discriminate against though they account for large shares of gross do- production and trade in developing countries and mestic product (GDP) and export earnings. And it the excessive subsidies that generate overproduc- is the industrial countries which provide subsidies tion in industrial ones. In the wider economy, bet- to agricultural production, even though their ter resource allocation policies are needed to help farmers account for small shares of GDP and em- developing countries adjust to changing external ployment. The Report examines the potential circumstancesa process which is essential for gains to the world economy from removing these growthand to correct certain deep-seated prob- distortions and concludes with a discussion of the lems that have constrained economic growth in in- priorities for reform. dustrial countries. The two parts of this Report explore these Prospects for the world economy themes. Part I examines the way the world econ- omy has performed since 1980 and looks at the The world economy is entering the fourth year of prospects for the next ten years It concludes that, its recovery from the deep recession of 1980-82. although recent declines in interest rates and oil The output of the five largest industrial economies prices are likely to provide a stimulus to the world grew by 3.0 percent in real terms in 1983 and by 4.2 economy, further policy reforms at both the do- percent in 1984, and annual rates of inflation have mestic and international levels are essential to take fallen sharply. In developing countries the growth full advantage of this stimulus. At a less aggregate in output increased from 2.0 percent in 1983 to 5.4 level, however, it is apparent that certain sub- percent in 1984. Yet growth, though sustained, has groups of developing countriesparticularly the recently slowed. The five largest industrial econo- heavily indebted oil exporters and some of the mies saw their growth rates fall to 2.8 percent in low-income African countrieswill continue to 1985, and unemployment and real interest rates I have remained high. In developing countries crease efficiency were necessary irrespective of de- growth slowed to 4.4 percent in 1985. Despite the velopments in the world economy. But the recent declines in oil prices, real interest rates, and magnitude of the changes in real interest rates, inflation, many developing countries continue to commodity prices, export markets, and net capital face serious problems that will constrain growth inflows led them to adjust quickly, which in some over the medium term. cases entailed high costs. Yet, those developing These developments are the subject of Chapter countries that maintained macroeconomic stability 2, which explores the policies that have shaped the and implemented policies to make the best of the character of the world economy since 1980. It ar- changing world economy have emerged with gues that, although many industrial countries strong growth rates and bright prospects. Others, have been successful in moderating the rate of however, have found it difficult to restore growth. monetary growth and thereby inflation, they have In many cases, inappropriate domestic policies been less successful in pursuing a consistent fiscal that have misallocated resources and reduced effi- policy. The increased acceptance of the view that ciency over long periods of time have resulted in high and uneven marginal tax-benefit rates distort little, if any, increase in output. The developments incentives and entail efficiency losses has made in the world economy after 1980 exposed the un- governments understandably reluctant to increase derlying vulnerability of these economies and in tax rates. But social and political pressures have some cases brought about a downturn in growth. also made it difficult to curtail benefits or reduce Declining per capita incomes, which had until the total public expenditure. As a result, public sector early 1980s occurred mostly in sub-Saharan Africa, deficits have not been significantly reduced and became more widespread, especially in Latin have remained large in absolute terms in the America. While growth did pick up in 1984, it has United States. This combination of monetary and proved difficult to sustain. fiscal policies was in large part responsible for the It is clear that developing countries have, on the interest rate and U.S. dollar movements that oc- whole, made an effort to reform domestic policies curred between 1980 and early 1986. The recent and to adjust to the changing international envi- falls in the U.S. dollar and in interest rates reflect ronment. In addition, for most countries the recent three developments: a renewed commitment to re- declines in oil prices and real interest rates have duce the U.S. federal budget deficit, the decline in created an external environment which will facili- oil prices, and the coordinated actions of the tate domestic reform efforts. For some countries, Group of Five countries (France, the Federal Re- however, the slower growth in world trade (caused public of Germany, Japan, the United Kingdom, in part by protectionism), weak export prices, large and the United States). repayment obligations on existing external debt, While the movements in interest rates and the and the continued decline of net capital inflows U.S. dollar imposed significant adjustment costs threaten to overwhelm these gains. The heavily on many economies earlier in the decade, there indebted oil-exporting countries will face a particu- were mitigating factors, the most important of larly difficult period over the next few years. Many which was the large U.S. trade deficit. This in- developing countries will have difficulty in main- creased the growth in world trade, particularly in taining imports and domestic investment at the 1984, which greatly assisted outward-oriented de- levels required to support growth over the me- veloping countries. But the coexistence of large dium term and service their external debt. A fur- trade deficits and record high levels of unemploy- ther reduction in per capita consumption levels ment in some industrial countries has had an un- will exacerbate political and social tensions in these fortunate side effect: a marked increase in the pres- countries and, as their imports contract, reduce the sure for more restrictions on international trade. number of jobs in other countries. Ironically, this pressure comes at a time when in- Chapter 3 explores two divergent paths that the dustrial countries are beginning to reap the bene- world economy might take during the next ten fits of the moderate progress they have made in years. The High case illustrates what could happen reducing rigidities and distortions in their domes- with appropriate policies that build upon the stim- tic factor and goods markets. ulus given to the world economy by recent devel- For developing countries, the first half of the opments. The Low case presents the alternative 1980s was a period of adjustment to a rapidly outcome if policies dissipate the results of these changing world economy. The reforms they imple- developments. In the High case, industrial coun- mented to improve resource allocation and in- tries could increase their real GDPs by an annual 2 average of 4.3 percent, whereas in the Low case quired to restore creditworthiness and growth, an the rate of growth would be only 2.5 percent. For effort in which the World Bank will play an impor- developing countries the divergence would be tant role. greater: 5.9 percent a year in the High case and 4.0 percent in the Low. It should be emphasized that Trade and pricing policies these are not forecasts; they merely illustrate what in world agriculture might be achieved if certain policies are pursued. For industrial countries the domestic policies The need to improve trade and pricing policies and needed to achieve the growth rates of the High to reform institutions is no less important in agri- case involve instituting stable monetary and fiscal culture than in the economy as a whole. And suc- policies, reducing price distortions, and introduc- cess in agriculture will, in turn, largely determine ing more flexibility into labor markets. Internation- economic growth in many low-income developing ally, a concerted effort to reduce trade restrictions countries and help to alleviate poverty in rural ar- would be needed to increase world trade. Because eas, where most of the world's poorest people live. industrial countries account for so large a share of Agriculture is the basic industry of the world's world output, their policies will play a principal poorest countries. It employs roughly 70 to 80 per- role in determining how the world economy per- cent of the labor force in low-income developing forms. But this does not mean that developing countries and about 35 to 55 percent in middle- countries cannot reap benefits by changing their income developing ones. It is also a main source of own policies. On the contrary, it is their policies GDP, accounting for 35 to 45 percent of GDP in that will determine the extent to which they take low-income developing countries (see Table 1.1). advantage of, or offset, changes in the interna- During the nineteenth century, almost all of to- tional economy over the medium term. If develop- day's industrial nations had roughly the same per- ing countries were to adopt policies that encourage centage of their labor forces engaged in agriculture domestic savings, increase the efficiency with that the low-income developing countries now which they use resources, and increase their links have. Some countries, notably Italy and the with the world economy, they could raise their U.S.S.R., had more than 70 percent of their labor growth rates significantly regardless of what the forces engaged in agriculture well into the twenti- industrial countries do. eth century. Today, the industrial countries of Nonetheless, the heavily indebted middle- Western Europe and North America have less than income countries will need extra help over and 10 percent of their labor forces employed in agri- above those policies to keep growth from stagnat- culture, and the average for all industrial countries ing and thus contributing to the instability of the is now just 7 percent. Already, agriculture's share world's financial markets. Additional assistance of GDP in all developing economies has fallen will also be required to reverse the decline in low- from 30 percent in the mid-1960s to about 20 per- income African countries. Chapter 3 argues that a cent in the early 1980s. Among industrial coun- coordinated domestic and international effort is re- tries, agriculture accounts for a little more than 3 Table 1.1 Agriculture's share of GDP, employment, and exports, selected years, 1964-84 (percent) Share of agriculture in: GDP Employment Exports' Country group 1964-66 1982-84 1965 1980 1964-66 1982-84 Low-income countries 42.8 36.3 76.0 72.0 58.6 32.8 Africa 46.9 41.3 84.0 78.0 70.7 68.4 Asia 42.5 35.7 74.0 71.0 54.0 25.9 Middle-income oil exporters 21.8 14.8 62.0 50.0 40.8 13.6 Middle-income oil importers, excluding major exporters of manufactures 25.2 18.0 63.0 53.0 54.2 44.8 Major exporters of manufactures 19.3 12.1 50.0 36.0 56.9 20.2 Developing countries 30.2 19.9 66.9 63.2 52.3 22.0 Industrial countries 5.1 3.1 13.7 7.1 21.4 14.1 Note: Data for developing countries are based on a sample of ninety countries. a. Includes reexports. 3 Table 1.2 Agriculture's share of exports in developing countries, 1979-83 Countries with Countries with Countries with Count ry group 30-60 percent share 60-80 percent share 80-100 percent share Low-income countries 4 6 11 Africa 3 3 11 Asia 1 3 0 Middle-income countries 16 12 I Oil exporters 1 0 0 Oil importers 11 11 1 Major exporters of manufactures 4 1 0 All developing countries 20 18 12 Note: Shares are the percentage of agricultural export earnings in total merchandise exports. Exports include reexports. Data are based on a sample of ninety developing countries. percent of GDP and approximately 14 percent of are not yet major exporters of manufactures. The exports. importance of agricultural exports is brought out in The share of agriculture in national income gen- greater detail in Table 1.2. erally declines as real per capita incomes rise, be- cause as people's incomes increase, they spend a Food production decreasing percentage on food. Also, as farmers increase the productivity of their land and labor, Agricultural output has grown rapidly in many de- the share of a country's resources required to grow veloping countries during the past fifteen years. food for the rest of the population decreases. In The growth in food production, which was faster low-income developing countries, a farm family in developing countries than in the industrial and provides enough food for itself and two other peo- East European nonmarket economies, was made ple; in most industrial economies, a farm family possible largely by the Green Revolution (see Fig- produces enough food for itself and as many as ure 1.1 and Table 1.3). This revolution began in the fifty other people. mid-1960s with the development of high-yielding For many developing countries, therefore, a varieties of wheat at the International Maize and healthy farm economy is connected with long-term Wheat Improvement Center (CIMMYT) in Mexico development. It is also connected with short-term and of high-yielding varieties of rice at the Interna- stability. Although agriculture's contribution to tional Rice Research Institute (IRRI) in the Philip- the export earnings of developing countries has pines and the International Center for Tropical Ag- fallen from about 52 percent in the mid-1960s, it riculture (CIAT). The new seeds were so still contributed 22 percent by the early 1980s. It productive that they made it profitable for farmers was higher in low-income African countries and in to update their farming methods by using more those middle-income oil-importing countries that fertilizer and other modern inputs and for both Table 1.3 Growth of agricultural production by major commodity group, 1961-84 (average annual percentage change) Beverages Food Raw materials Total agriculture Country group 1961-70 1971-84 1961-70 1971-84 1961-70 1971-84 1961-70 1971-84 Developing countries -0.4 1.9 2.2 3.2 4.5 2.3 2.4 3.0 Low-income countries 1.9 1.2 1.3 3.2 5.7 3.8 1.9 3.3 Africa 2.3 -0.5 2.6 2.0 6.0 -1.8 3.0 1.2 Asia 1.2 3.6 1.2 3.4 5.7 4.3 1.8 3.6 Middle-income oil exporters 3.5 0.5 3.0 3.1 1.5 -0.9 2.7 2.2 Middle-income oil importers -2.9 2.8 3.5 3.2 4.8 1.0 2.9 2.9 High-income oil exporters -6.8 0.6 4.9 14.6 8.0 -0.5 5.0 14.1 Industrial market economies 0.9 0.4 2.9 2.1 -4.9 0.4 2.2 2.0 East European nonmarket economies 5.3 7.0 3.6 0.5 4.3 1.9 3.7 0.7 World -0.3 1.9 2.7 2.4 2.2 2.0 2.5 2.3 Note: Data are weighted by the 1978-82 world export unit prices to permit cross-country comparisons. Growth rates are least-squares estimates. Beverages comprise coffee, cocoa, and tea. Food comprises cereals, sugar, meat, poultry, dairy products, roots and tubers, pulses, fruits, and vegetables. Raw materials comprise cotton, jute, rubber, and tobacco. Source: Based on FAO data. 4 Table 1.4 Growth of cereal production Figure 1.1 Trends in agricultural and food in selected developing countries, 1971-84 production, 1961-84 Average annual Billions of dollars Country group percentage change 600 Agricultural production High performers Indonesia 5.2 Korea 5.0 Philippines 4.5 Pakistan 4.3 400 Low performers Gambia 0.3 Haiti 1.1 200 Zambia 2.2 Ghana 2.4 Source: Based on FAQ data. 0 a year, respectively, both rates exceeding popula- 600 Food production tion growth. Some countries achieved even higher growth rates (see Table 1.4). But the Green Revolu- tion was, for the most part, confined to irrigated land. It left some areas untouched, especially in 400 Africa. The ramifications of technological progress are great. The fact that some countries still lag far be- hind others in yields implies that there is great scope for future production increases on existing land (see Figure 1.2). More technological break- throughs are possible. Biogenetic research is likely to lead to the development of new crop varieties 0 that require fewer inputs and are more tolerant of 1961 1965 1970 1975 1980 1984 pests, drought, and disease. As more research and investment take place in agriculture, the cost of Developing countries producing food should continue to decline, as it Industrial countries has for more than a century. East European nonmarket economies Real wholesale prices of wheat, sugar, and maize Note: Data are weighted by the 1978-82 world export unit prices. (corn) from 1800 to 1985 and rice prices for a The decline in production in the industrial countries in 1983 was shorter period are shown in Figure 1.3. While the caused by a fall in U.S. output due to the effects of the acreage reduction program and a drought. prices have fluctuated widely, the trend has clearly Source: Based on FAO data. been downward since the mid-1800s. Even the soaring prices of the early 1970s were not extraor- dinary by historical standards. Maize prices have been in more or less continuous decline since farmers and governments to invest more on im- World War II, owing to the introduction of hybrid proving irrigation. In India's Punjab, for example, varieties and their subsequent improvements. De- thousands of irrigation wells were dug between spite a boom in the early 1970s, the price of rice is 1967 and 1972, mainly by farmers. Fertilizer con- at its lowest level since 1900. These trends are a sumption rose from 0.76 million tons in 1966 to reminder that, for more than a hundred years, 2.38 million tons in 1972. costs of agricultural production have fallen in real The combination of improved seeds, more fertil- terms. It is also worth noting that the numerous izer, and improved irrigation doubled yields on ir- periods of sharp price increases were of short du- rigated land in developing countries. China and ration, generally three years or less. Table 1.5 India, the two most populous countries, expanded presents a broader summary of the price trends cereal production at the rate of 3.2 and 4.1 percent since 1950. 5 Robert Maithus had suggested in the early nine- Figure 1.3 Trends in U.S. real agricultural teenth century that the world would run short of prices, selected years, 1800-1985 food as population expanded faster than the capac- ity to produce food. The decline in real food prices Dollars per bushel 7 Wheat Figure 1.2 Grain yields in selected countries, 5 1965-84 Tons per hectare 8 Maize 3 United States 1 6 Dollars per pound 0.40 4 0.35 0.25 2 Brazil Ethiopia / 0.15 0 Nigeria 0.05 8 Rice Dollars per bushel 3 Japan Corn 6 2 4 United States China 1 Indonesia 0.40 India 1800 1860 1920 1980 0 Dollars per hundredweight 11 8 Wheat United Kingdom 8 5 - France 2 1869 1887 1905 1923 1941 1953 1977 2 Note: Producer prices are deflated by the U.S. wholesale price index (1967 = 100). Corn prices before 1866 are estimates based on Virginia prices. Rice prices before 1904 are estimates based on New York prices. The broken line indicates data are not available. 0 Source: USDA Agricultural Statistics, various years; U.S. Bureau 1965 1970 1975 1980 1984 of the Census 1975, 1982, 1985; Strauss and Bean 1940; Peterson 1928. Source: FAQ. 6 Table 1.5 Real growth of commodity prices, 1950-84 (average annual percentage change) Commodity 1950-59 1960-69 1970-79 1950-84 Total agriculture -2.92 0.00 0.01 -1.03 Beverages -2.08 -1.26 7.46 -1.13 Cereals -3.84 2.72 -1.31 -1.30 Fats and oils -3.73 -0.73 -0.81 -1.29 Raw materials -2.51 0.50 -1.72 -1.08 Metals and minerals 0.08 6.12 -4.06 -0.09 Note: Data are deflated by the World Bank's manufacturing unit value (MUV) index. The MUV index is the cii. index of U.S. dollar prices of industrial countries' manufactured exports to developing countries. Annual exponential growth rates were calculated using ordinary least- squares estimates. since Maithusian times is, however, dramatic testi- but by any account the problem is vast. A recent mony to the ability of farmers to adopt new tech- World Bank paper, Poverty and Hunger: Issues and nologies for the benefit of all, especially those with Options for Food Security in Developing Countries the lowest incomes, as economic growth proceeds. (1986), put the number somewhere between 340 Maithusian pessimism still prevails about the million and 730 million people-and that excluded prospects for food production in Africa. But if the China. Malnutrition poses a challenge for all low- prospects in that region seem poor, this is not be- income developing countries, large or small. Gov- cause all possibilities of technological progress ernments naturally want to take special measures have been exhausted, but because the introduction to alleviate it-such as by providing cheap food for of new technologies has barely begun. There is the poor, by income transfers, by aid relief efforts, much need for better rural infrastructure and more or by other types of food and nutrition programs. research, especially on food crops. The coordina- But, beyond a certain point, these types of mea- tion of research with extension services also needs sures will reduce economic growth and make it to be improved. At the same time, farmers need harder to finance the measures the government better prices, easier access to inputs, and lower wants. That point is soon reached in low-income marketing costs. As discussed in Chapter 4, eco- countries with low rates of economic growth. nomic policies that discriminate against agriculture Developing countries-and the world in deter technological progress. Macroeconomic and general-are justifiably concerned about malnutri- sector-specific policies strongly influence the prof- tion. The causes of widespread malnutrition, how- itability of farming, the movement of labor and ever, are often not the insufficiency of food pro- capital into, or out of, agriculture, and the pace at duction but, rather, poverty and uneven which new technologies are developed and distribution of income. Special programs, if under- adopted by farmers. taken in a cost-effective manner, can alleviate mal- nutrition, but there is little hope that low-income Malnutrition and famine developing countries will be able to make signifi- cant and sustained progress in reducing malnutri- Although production of food has grown faster tion unless they increase their rates of economic than population in developing countries, con- growth (see Box 1.1). The best policies for alleviat- sumption of food has grown even faster because of ing malnutrition and poverty are those which in- imports. Food consumption in developing coun- crease growth and the competitiveness of the tries grew at 3.5 percent a year between 1971 and economy, for a growing and competitive economy 1984, while population grew at 2.0 percent a year. facilitates a more even distribution of human capi- In Africa, however, consumption grew at only 2.6 tal and other assets and ensures higher incomes percent a year-which was less than the region's for the poor. Progress in the battle against malnu- 2.8 percent annual growth in population. For the trition and poverty can be sustained if, and only if, world's thirty-six poorest countries, twenty-six of there is satisfactory economic growth. them in Africa, the level of per capita food con- With the terrible images of the African famine sumption declined by about 3.0 percent during the still fresh in mind, it is hard to believe that the 1970s. occurrence of famine is declining. Yet, it is true. Precise estimates of the incidence of chronic mal- Until the twentieth century a famine was recorded nutrition in developing countries are not possible, nearly every year somewhere in the world, often 7 Box 1.1 Food security A main message of this Report is that, in the long run, tives are not compromised in the process. people can attain food security only if they have ade- Problems with food security do not necessarily quate incomes. Food security and policies designed to result from inadequate food supplies; they arise from a enhance it are the subjects of a recent World Bank lack of purchasing power on the part of nations and of study, Poverty and Hunger: Issues and Options for Food households. Food security can be ensured in the long Security in Developing Countries (1986). Among its find- run only by raising the real incomes of households so ings are: that they can afford to acquire enough food. Food security is access by all people at all times to Poverty and Hunger discusses a variety of cost- enough food for an active and healthy life. There are effective ways to increase food security in the short two kinds of food insecurity: chronic and transitory. term. Many measures to address chronic insecurity are Chronic food insecurity is a continuously inadequate fully compatible with efficient economic growth be- diet caused by the inability to acquire food. It affects cause they involve raising people's productive capac- households that persistently lack the ability either to ity. But others involve tradeoffs of one kind or another. buy enough food or to produce their own. Transitory However, as both that study and Chapters 4 and 5 of food insecurity is a temporary decline in a household's this Report point out, some of the measures that gov- access to enough food. It results from instability in ernments take to increase food security work against food prices, food production, or household incomes both economic growth and food security in the long and in its worst form it produces famine. run. Such measures include persistently overvalued Food security issues are important because im- currencies, iarge expenditures on consumer food sub- proved nutrition is an investment in the productivity sidies, and costly storage facilities to hold excessive of a nation's population. Also, the adjustment mea- stocks of food grain. When tradeoffs are present, tar- sures countries undertake to improve economic perfor- geting food assistance to the most vulnerable groups is mance are more likely to succeed if food security objec- far more effective and less costly than other measures. with death tolls which, even by modern experi- ute food to drought-stricken areas and to provide ence, were distressingly high. More than 10 mil- the hungry with the means to acquire available lion people may have died from famines in Bihar, food. Fourth, and most important, many govern- India, in the early 1770s, in eastern India in the late ments have come to recognize that famine is a 1860s, and in northern China in the 1870s. complex phenomenon. Economic policiessuch as Although the world has suffered a dozen fam- those on internal and external trade, producer ines since 1940, all but a few were much smaller in prices, and methods of financing and distributing scale than the famines of previous centuries. More- foodaffect a country's vulnerability to famine over, while the Sahel famine in the early 1970s con- (see Box 1.2). formed to the popular image of crops withering in the dry land, leading to starvation, many of the Trade and prices famines since 1940 resulted from war or civil strife rather than from weather conditions or shortfalls Despite the fact that the global food outlook is fa- in food availability. vorable, one cannot be sanguine about the state of The example of Africa and the memory of past world agriculture. The outlook could be much famines should not divert attention from the strik- more favorable if trade and pricing policies were ing success that the past quarter century has seen improved. Most agricultural goods are traded in in preventing famineparticularly in India. Four world markets, providing all countries with oppor- factors have contributed to the success. First, the tunities to increase their incomes by specializing in increase in international grain trade has meant that products in which they have a competitive advan- countries in need can import food more readily. tage. The strides made by developing countries in Second, governments, assisted by the Food and agriculture during the past few decades show that Agriculture Organization (FAO) and other interna- developing countries as well as industrial coun- tional agencies, have become more willing to pro- tries benefit from an efficient system of world vide early warnings of impending shortages. trade. Yet, trade barriers in industrial countries Third, countries have become better able to distrib- have become more restrictive, and most develop- 8 ing countries pursue policies that inhibit the ports grew at 4.64 percent a year while manufac- growth of agricultural output and of rural incomes. tured exports grew at 4.78 percent. The growth of As a result, most of the world's food exports are trade in food has been most rapid-5.27 percent a grown in industrial countries, where the costs of year. The developing countries have largely ac- food production are high, and consumed in devel- counted for the rapid growth of food imports (see oping ones, where the costs are lower. Figure 1.4). The middle-income developing coun- So many developing countries depend on agri- tries accounted for 80 percent of the growth in cultural exports that what happens in world agri- developing-country imports between 1962 and cultural markets is critical. Between 1965 and 1970, 1984, although they account for only about one- world agricultural exports grew more slowly than third of that group's population. The fastest those of any other major commodity groupthe growth of food exports came from industrial coun- growth rate was only 3.21 percent a year compared tries. with 8.46 percent a year for manufactured exports Changes in the structure of food trade have been (see Table 1.6). just as important as the expansion of food exports. Since 1970 the growth of agricultural exports has As shown in Figure 1.4, food imports by the devel- increased while that of manufactured exports has oping countries have surged since 1975 and by slowed. Between 1971 and 1984, agricultural ex- 1984 nearly equaled the level of food imports of the Box 1.2 Adam Smith on the causes of famine and the modern evidence Famine can be caused by a variety of factors. Drought, ies of contemporary famines by Amartya Sen (1981, flood, war, inflation, sharp losses of employmentall 1986). The economic processes through which differ- these and other developments can deprive large parts ent occupation groups establish their entitlements to of a population of the means to acquire adequate food have to be closely examined to explain the eco- amounts of food. The complexity of famine was dis- nomic changes that lead to "want, famine, and mortal- cussed illuminatingly by Adam Smith more than 200 ity," and Smith's reference to the economic means of years ago. Smith repudiated the then commonly held subsistence (such as wages and employment) is partic- view that famine often results from manipulation of ularly helpful. For example, in the Ethiopian famine of markets by traders. He argued that "a dearth never 1973, there was a crop failure in the province of Wollo, has arisen from any combination among the inland but no serious decline in total food availability for Ethi- dealers in corn" (Smith [1776! 1976, bk. 4, chap. 5, p. opia as a whole. The famine victims in Wollo lacked the 32). No less important, Smith analyzed the relation economic ability to command food from elsewhere in between a general economic declinenot specifically Ethiopia (indeed, some food moved out of famine- of food outputand the development of a famine. He stricken Wollo to the more prosperous parts of the discussed the role of wages and employment in pro- country, particularly Addis Ababa and Asmera). Simi- viding subsistence and showed how starvation can be larly, in the Bengal famine of 1943 and in the Bangla- caused by declines in employment or in real wages. desh famine of 1974, declines in real wages and em- In a situation of economic decline, he wrote, "the ployment in the rural sector were the proximate demand for servants and labourers" could go down causes, and there was no great reduction in food avail- sharply, and "many who had been bred in the supe- ability (in fact, total food per head was at a peak during rior classes, not being able to find employment in their the Bangladesh famine). In the case of the Bengal fam- own business, would be glad to seek it in the lowest," ine, the interprovincial trade barriers that prevented so that "the competition for employment would be so movements of food grains from other provinces to great in it, as to reduce the wages of labour to the most Bengal helped to worsen the famine. miserable and scanty subsistence of the labourer. Policies on famine require a many-sided economic Many would not be able to find employment even analysis of the factors affecting the market entitlements upon these hard terms, but would either starve, or be of the vulnerable groups. They call for an understand- driven to seek a subsistence either by begging, or by ing of the exact roles of production and trade of non- the perpetration perhaps of the greatest enormities. food items, as well as of food, and of the nature of Want, famine, and mortality would immediately pre- government policy, including the negative role of arbi- vail in that class, and from thence extend themselves to trary internal and external trade barriers and the posi- all the superior classes" (ibid, bk. 1, chap. 8, p. 82). tive contribution of income generation through public Smith's conclusions about the general economic projects. causes of famine have been confirmed by recent stud- 9 Table 1.6 Growth of world exports, 1965-84 (annual percentage change in constant 1980 prices) 1965-70 1971-84 Exports average average 1981 1982 1983 1984 Agriculture 3.21 4.64 7.33 -0.63 -0.31 7.18 Food 2.66 5.27 8.68 1.58 -0.05 7.79 Nonfood 4.33 3.00 3.71 -2.02 -1.08 5.39 Metals 9.65 4.90 -13.96 -6.39 4.59 4.87 Fuel 12.70 -3.25 -12.03 -7.23 -2.02 2.01 Manufactures 8.46 4.78 4.23 -2.40 4.81 11.15 Total 9.32 2.60 0.04 -3.07 2.61 8.55 Note: Exports include reexports. East European nonmarket economies are not included in this table. Growth rates were calculated using ordinary least-squares estimates. industrial market economies. Food imports by the tion, the convenience of bread, and low interna- East European nonmarket economies also have tional prices all contributed, as did overvaluations grown. The food trade balance has shifted sharply of exchange rates and urban food subsidies in against developing countries at a time of growing many developing countries. Still another factor indebtedness and foreign exchange scarcities. was the availability of food aid in some countries. The changing pattern in food trade shown in Fig- In Bangladesh (then East Pakistan) in 1960, wheat ure 1.4 has clearly been the most striking feature of consumption was less than 2 percent of total grain world trade in agriculture in recent decades. It also consumption. Because of the subsidized distribu- explains the evolution of export shares. As shown tion of wheat from food aid, and also increased in Table 1.7, the developing countries as a group local production, wheat now constitutes about 20 have had only modest losses of export market percent of grain consumption. The increasing de- shares in beverages and raw materials since the pendence on wheat and the inability to produce it early 1960s, but their losses in market shares in economically in many countries means that it has food have been large. to be imported in greater quantities. Between 1979 These changes reflect not only population and 1981, wheat accounted for 59 percent of food growth but also changing consumption patterns grains imported into developing countries. While and economic policies in developing countries. wheat consumption increased, consumption of The best example is the growing importance of coarse grains-maize, barley, and so on-mostly wheat in the diets of poor people. Between 1964 decreased as a portion of total cereal consumption. and 1966 the developing countries' share of world The exceptions were those rapidly growing devel- wheat consumption was 39 percent; the average in oping economies where meat has become impor- 1979-81 was 49 percent. The growth of urbaniza- tant in the diet. Hong Kong, the Republic of Korea, Table 1.7 Export shares of major agricultural commodity groups, 1961-63, 1982-84 (percent) Beverages Food Raw materials Total agriculture Country group 1 961-63 1982-84 1961-63 1982-84 196 1-63 1982-84 1961-63 1982-84 Developing countries 98.1 94.9 44.8 34.2 69.2 65.3 63.1 48.4 Low-income countries 27.6 23.8 9.0 3.6 15.6 13.6 15.1 8.3 Africa 19.6 15.8 1.5 0.3 6.0 4.9 6.9 3.5 Asia 8.0 8.0 7.5 3.3 9.6 8.7 8.0 4.8 Middle-income oil exporters 17.1 17.6 6.5 3.3 33.9 24.7 14.8 8.8 Middle-income oil importers 53.4 53.5 29.3 27.3 19.7 27.0 33.3 31.3 High-income oil exporters 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.1 Industrial market economies 1.7 4.7 46.2 62.7 23.5 24.0 30.5 47.9 East European nonmarket economies 0.2 0.4 8.9 3.0 7.3 10.7 6.4 3.6 Note: Data are weighted by the 1978-82 world export unit prices to permit cross-country comparisons. Beverages comprise coffee, cocoa, and tea. Food comprises cereals, sugar, meat, poultry, dairy products, roots and tubers, pulses, fruits, and vegetables. Raw materials comprise cotton, Jute, rubber, and tobacco. Source: Based on FAO data. 10 Malaysia, the Philippines, and Thailand increased Figure 1.4 Trends in food trade and trade their indirect consumption of coarse grains as feed balance, 1961-84 to livestock and poultry. These changes in the structure of consumption Billions of dollars 60 Food imports and trade have been heavily influenced by pricing and trade policies. Agricultural trade restrictions at least among the industrial countrieshave in- creased greatly. The levels of protection before 40 World War I and during the 1920s and 1950s were modest in comparison, as discussed in Box 1.3. The unprecedented growth in exports of manufac- tures, first in Japan and recently in Hong Kong, 20 Korea, and Singapore, was made possible by the creation of an open trading system. This has served the world well by stimulating economic growth in both industrial and developing coun- 0 tries. The opposite has occurred in agriculture. In- terventions are almost universal, and much trade is managed by public sector agencies and market- 60 Food exports ing boards. Bilateral trade deals, food aid, and spe- cial preferences have further distorted trade flows in agriculture. When domestic prices are kept below world prices at country borders, producers of import- competing products or of exports are taxed; simi- larly, when domestic producers get prices that are higher than border prices, they are supported. The ratio of domestic prices to border pricesor the nominal protection coefficient (NPC)is thus a convenient indicator of policies that bear on trade. The pattern of policies followed by industrial 0 and developing countries is summarized in Figure 1.5, which is based on a large number of nominal protection coefficients for food and nonfood crops 18 Food trade balance (including exports and imports). Developing coun- tries clearly tend to tax agricultural commodities 12 and thus encourage imports and discourage ex- ports. The effect is often stronger than reflected in 6 Figure 1,5 because of overvalued exchange rates. Industrial countries, in contrast, tend to support domestic production and thereby inhibit imports 0 and encourage exports. As this pattern suggests, the bias against agricul- 6 ture in developing countries is exacerbated by the high levels of protection in the industrial ones. The industrial countries have erected high barriers to 14 imports of temperate-zone products from develop- 1961 1965 1970 1975 1980 1984 ing countries and then have subsidized their own Developing countries exports. The special trade preference schemes they Industrial countries have extended to many developing countries have East European nonmarket economies not been a significant offset to their trade restric- tions. Note: Imports and exports are volume data weighted by the Policies in industrial countries affect the level, 1978-82 world export unit prices. Source: Based on FAO data. direction, and stability of world prices. A few de- 11 veloping countries can also affect world prices of that a global perspective is necessary in examining beverages, raw materials, and some foods. Collec- the development and future growth of agriculture tively, the policies in developing countries can alter because the domestic agricultural policies and pro- the world prices of temperate-zone products. The grams of various countries are interdependent. fact that both industrial and developing countries Part II of this Report examines policies in devel- insulate domestic prices from world markets oping and industrial countries and shows how makes world prices more volatile than they would they inhibit both economic and agricultural growth be otherwise. A principal theme of this Report is and delay the alleviation of malnutrition and pov- Box 1.3 Agricultural protectionism in historical context Governments have protected farmers for centuries. commodities. In the extreme case of Finland, tariffs on Since the beginning of industrialization, there has agriculture were five times higher than those on semi- been only one brief interlude of free trade in agricul- manufactured goods. Germany's agricultural tariffs ture in Europe. It began with the abolition of the Corn were four times higher than its industrial tariffs. Laws by the United Kingdom in 1846 and by 1860 had Levels of protection in the 1950s in Western Europe spread throughout most of Western Europe. But free had been reduced to those of the 1920s. A decade later, trade lasted less than two decades. During the next however, they had substantially increased (see Box ta- fifty years, only Denmark, the Netherlands, and the ble l.3B). The average level for the European Commu- United Kingdom resisted the drift back to protection- nities (EC) was more than three times what it had been ism that culminated in the high tariff levels imposed a decade earlier, and in France and Italy the protection during the Great Depression. had almost returned to its level in 1931. The protection of agricultural products before World In East Asia no less than in Western Europe, the I War I and during the 1920s was still modest compared origins of agricultural protection go back beyond the with that of the 1930s. Box table 1.3A shows a sample recent past. In 1904, Japan imposed a tariff on rice of estimated tariff levels for 1913, 1927, and 1931 for imports. During the 1920s and 1930s it kept domestic foodstuffs and manufactured goods. For Western Eu- prices high to encourage self-sufficiency. A measure of rope the tariff levels on foodstuffs in 1913 were roughly this protection was the difference between rice prices the same as those on manufactured goods. In 1927 in Japan and Thailand. In the 1920s the price in Japan they were only slightly higher. By 1931, however, tar- was three times higher than in Thailand, too great a iffs on foodstuffs had soared above those on other variation to be explained by differences in quality. The Box table 1.3A Estimated tariff levels in Europe as a percentage of border prices, 1913, 1927, and 1931 Semimanufactu red Industrial manufactured Foodstuffs goods goods Country 1913 1927 1931 1913 1927 1931 1913 1927 1931 Austria 16.5 59.5 . . 15.2 20.7 . . 21.0 27.7 Belgium 25.5 11.8 23.7 7.6 10.5 15.5 9.5 11.6 13.0 Bulgaria 24.7 79.0 133.0 24.2 49.5 65.0 19.5 75.0 90.0 Czechoslovakia 36.3 84.0 . . 21.7 29.5 . . 35.8 36.5 Finland 49.0 57.5 102.0 18.8 20.2 20.0 37.6 17.8 22.7 France 29.2 19.1 53.0 25.3 24.3 31.8 16.3 25.8 29.0 Germany 21.8 27.4 82.5 15.3 14.5 23.4 10.0 19.0 18.3 Hungary . 31.5 60.0 . . 26.5 32.5 . . 31.8 42.6 Italy 22.0 24.5 66.0 25.0 28.6 49.5 14.6 28.3 41.8 Poland . 72.0 110.0 . . 33.2 40.0 . . 55.6 52.0 Romania 34.7 45.6 87.5 30.0 32.6 46.3 25.5 48.5 55.0 Spain 41.5 45.2 80.5 26.0 39.2 49.5 42.5 62.7 75.5 Sweden 24.2 21.5 39.0 25.3 18.0 18.0 24.5 20.8 23.5 Switzerland 14.7 21.5 42.2 7.3 11.5 15.2 9.3 17.6 22.0 Yugoslavia 43.7 75.0 . . 24.7 30.5 28.0 32.8 Note: The numbers show the percentages by which domestic producer prices exceeded border prices. Ssurce: Based on Liepmann 1938, p. 413. 12 erty in the developing world. Chapters 4 and 5 propriate macroeconomic and exchange rate poli- review the scope in developing countries for im- cies. These chapters also show the importance of proving agricultural policies and performance re- reforms in tax policies, price stabilization mea- gardless of policy changes in industrial countries. sures, marketing arrangements, and consumer These chapters show why and how the policies in developing countries have often discriminated against agriculture. The sources of bias include inward-looking development strategies and map- Figure 1.5 Nominal protection coefficients Developing countries Relative frequency (percent) PRODUCER PRODUCER 32 TAXATION SUPPORT Republic of Korea, which was a part of the Japanese empire from 1919 to 1945, maintained the same level of 24 protection. After 1945, Japan continued to protect its agriculture, but Korea, in its effort to industrialize, began to tax farmers. The level of taxation, however, was modest compared with the taxation rates in some low-income 16 developing countries today. In the mid-1950s, domes- tic producer prices in Korea were about 15 percent lower than border prices. The level of protection in Japan during the late 1950s was more than 40 percent. 8 Since then, both countries have dramatically increased agricultural protection. By 1965, Japan's level of farm protection had risen to 76 percent, while Korea, in less than two decades, had gone from taxing its farmers to r substantially protecting them. On average, domestic 0 n I I I producer prices in Korea exceeded border prices by 55 0.1 0.5 1.0 1.5 2.0 2.5 3.0 percent from 1970 to 1974 and by 166 percent from 1980 or higher Nominal protection coefficient to 1982. Industrial countries Box table 1.3B Estimated tariff levels as a percentage PRODUCER PRODUCER of border prices, 1956 and 1965-67 TAXATION SUPPORT 24 1965-67 Country 1956 average Belgium 5 54 Denmark 3 5 EC 16' 52 16 France 18 47 Germany 22 54 Ireland 4 3 Italy 16 64 42b 8 Japan 76' Netherlands 5 37 Sweden 27 54 United Kingdom 32 28 United States 8' 0 Note: The numbers are calculated as in Box table 1.3A. I I I I Excludes Denmark, Greece, Ireland, Portugal, Spain, and the 0.1 0.5 1.0 1.5 2.0 2.5 3.0 United Kingdom. or higher Nominal protection coefficient Data are for 1955-59. Data are for 1965-69. Data are for 1955. Food and beverages Data are for 1965. D Raw materials Source: McCrone 1962, p. 51; I-Iowarth 1971, p. 29; Saxon and Anderson 1982, p. 29; Honma and Hayami, forthcoming. The Note: Data for developing countries are based on 189 NPCs for McCrone and Howarth estimates have been adjusted to measure thirty-seven countries for 1979-81. Data for industrial countries protection in international prices instead of in domestic prices. are based on 20 NPCs for four countries for 1979-81. Source: Based on FAD data. 13 and producer subsidies. Developing countries can tance. In the short run, industrial countries and greatly improve their prospects by changing their some developing countries are likely to gain most economic and institutional policies, as some of from free trade, but the gains should spread rap- them have already done or are in the process of idly to other countries if they undertake appropri- doing. The emerging trend toward policy reforms ate economic policy reforms. in developing countries is reviewed in Chapter 5. Chapter 7 looks at the major international initia- Chapter 6 reviews policies in industrial countries tives that have been proposed or taken to increase and counts their costs and benefits domestically the benefits of trade for developing countries and internationally. Their policies are not only international commodity agreements, compensa- costly nationally, but are an important source of tory financing, special trade preferences, and food inefficiency in world agriculture. The chapter aid. It is argued that these types of initiatives ad- stresses the international consequences of the in- dress the symptoms rather than the problem itself, dustrial countries' policies and the large potential which is the inappropriateness of trade and do- gains to the world economy from more liberal mestic policies in both industrial and developing trade and domestic policies in all countries. countries. The Report ends by summarizing in The interactions between developing and indus- Chapter 8 the priorities for policy reforms. trial countries are shown to be of particular impor- 14 Part I The Hesitant Recovery and Prospects for Sustained Growth 2 The hesitant recovery Industrial countries have emerged from the depths tween 9 and 10 percent of the labor force. Even in of the 1980-82 recession with growth in output be- the United States, where unemployment has fallen ing sustained for longer than in previous recover- since the recession, the unemployment rate is be- ies. In most industrial countries output started ex- tween 6 and 7 percent. In contrast, as GDP has panding after 1982, and growth has continued through to 1986 (see Table 2.1). Yet, the world economy is in an uneasy and unsettled state. Ex- cept for the United States and Japan in 1984, ex- Figure 2.1 Growth rate of real GDP in pansion in the industrial countries has been slower developing and industrial countries, 1961-85 than in the early years of past recoveries. Percent For developing countries, growth in output has 10 followed a similar pattern. Growth picked up after 1982, reaching its peak in 1984 (see Figure 2.1). But Developing countries 8 a downturn in commodity prices in 1985, com- bined with restricted capital flows and a marked slowdown in the growth of world trade, has made it difficult for developing countries to sustain this 1 A performance. As a result, many of the underlying weaknesses in developing economies began to re- surface in 1985. This has refocused international uul!III! attention on the policy initiatives required to attain 2 strong and sustained growth in the medium term. Industrial countries In industrial countries unemployment increased 0 sharply during the recession of 1980-82, and it has remained at high levels in most of them during the 1961 1965 1970 1975 1980 1985 recovery. In Europe unemployment remains at be- Table 2.1 Growth of real GNP in selected industrial countries, 1979-85 (annual percentage change) Country 1979 1980 1981 1982 1983 1984 1985 France 3.5 1.1 0.3 1.8 0.7 0.6 1.0 Germany 4.4 2.0 -0.1 -1.2 1.3 2.7 2.3 Japan 5.2 4.8 4.1 3.3 3.4 5.8 5.0 United Kingdom 1.8 -2.6 -1.4 1.5 3.7 2.3 3.3 United States 3.2 -0.2 3.4 -2.1 3.7 5.2 2.5 Average for the five 3.6 0.9 2.2 -0.2 3.0 4.2 2.8 Note: Data for 1985 are estimates. Source: For 1979-84: World Bank data; for 1985: OECD 1985c. 15 grown, there have been no obvious signs of a re- marked improvement in the economic perfor- vival of inflation. On the contrary, inflation has mance of many middle-income economies. But gradually subsided during the recovery, falling growth slowed again in 1985 as a result of three from the double-digit rates of the depth of the re- main changes: slower growth in the industrial cession to around 4 percent in 1985. countriesparticularly in the United States For most developing countries the early 1980s starting from the middle of 1984, a slower rate of was a difficult period. Many attempted to imple- expansion in world trade relative to industrial- ment badly needed domestic reforms, but found country growth, and a further deterioration in de- that wide fluctuations in the world economy made veloping countries' terms of trade. In addition, in- their task that much harder. Mounting debts, low flows of external capital continued to decline. commodity prices, and reduced commercial bank While many economies should grow more rapidly lending led many countries to cut imports and to this year, someoil exporters in particularwill try to expand exports. In the short run this was experience very low growth. achieved mainly by curtailing consumption and in- During the process of adjustment, however, vestment through lower exchange rates, higher many governments saw that fundamental changes taxes, and reduced government spending. Al- were needed in institutional arrangements to though the exchange rate realignments often stim- avoid the problems that had gradually overtaken ulated exports and helped import-competing in- them in the 1970s and that had caused such dis- dustries, these short-term adjustments initially tress in the 1980s. Many have seen the need to depressed incomes and employment. As a result, reform the incentive framework to reduce the dis- real per capita incomes dropped in both Latin tortions caused by inflation, regulations, overval- America and sub-Saharan Africa between 1980 and ued exchange rates, trade controls, and excessive 1983. public expenditure. It is difficult to change institu- Beginning in 1984, renewed growth in the indus- tions and policies even at the best of times. Many trial countries and the policy reforms adopted by countries nevertheless embarked on programs of developing countries bore fruit. The developing reform during the early 1980s. These programs countries as a group enjoyed a recovery, led by a may, if resolutely pursued, provide a basis for sus- tained growth and development. However difficult the external conditions, do- mestic policies that improve the incentive frame- Figure 2.2 Growth, inflation, and work and reduce uncertainties will contribute to unemployment rates in seven major industrial growth. But the more favorable the international countries, 1965-85 environment, the greater will be the benefits of Percent policy reforms to developing countries. Thus, the 14 performance of industrial economies is an impor- tant determinant of the progress of developing 12 economies. To understand what has happened in developing countries, therefore, the policies and performance of industrial countries must also be reviewed. Unemployment The industrial countries FA!A Ai!!.A.. Figure 2.2 illustrates the performance of the seven largest OECD economies since the mid-1960s. Be- hind the cycles of GDP growth, unemployment, Real GDP growth and inflation lie some disturbing long-term trends. Each peak in GDP growth has been lower than the 2 preceding one; peaks as well as troughs in unem- 1965 1970 1975 1980 1985 ployment have been rising. Progress has been Note: Data are for Canada, France, Germany, Italy, Japan, the made only in curbing inflation. Lower inflation, United Kingdom, and the United States. however, has been accompanied by unemploy- Source: For GDP growth: World Bank; for inflation and unem- ment rates roughly two to three times higher than ployment: OECD. the level in the 1960s. 16 Table 2.2 Budget balance as a percentage of GNP in seven major industrial countries, 1979-85 Country 1979 1980 1981 1982 1983 1984 1985 Canada -1.8 -2.7 -1.6 -5.0 -6.2 -6.4 -6.0 France -0.7 0.2 -1.8 -2.7 -3.1 -2.8 -3.2 Germany -2.7 -3.1 -3.8 -3.4 -2.8 -2.3 -1.5 Italy -9.5 -8.0 -11.9 -12.6 -12.4 -13.5 -13.1 Japan -4.8 -4.5 -4.0 -3.6 -3.5 -2.6 -1.4 United Kingdom -3.2 -3.9 -3.2 -2.3 -3.5 -4.0 -3.6 United States 0.6 -1.2 -0.9 -3.8 -4.1 -3.4 -3.7 Note: Negative signs indicate deficits. Source: OECD 1985c. Monetary and fiscal policies Budget deficits and interest rates After inflation accelerated at the end of the 1970s to The domestic effects of large and persistent deficits historically high rates, most of the industrial coun- are mainly on real interest rates and expected infla- tries attempted to reduce the rate of growth of tion. The manifest difficulties of cutting public monetary expansion. The details of the policy mea- spending lead people to expect that revenues will sures adopted in the early 1980s differed from eventually have to rise to finance deficits. Boosts to country to country, but in substance they were public revenue may come from high growth, con- similar. First, they were medium-term strategies- ventional taxes, or the seigniorage of inflation (see that is to say, they were concerned with a period of Box 2.1). Worries about future inflation tend to at least four to five years. Second, they encom- keep long-term nominal interest rates higher than passed both fiscal and monetary measures. Gov- they would otherwise be, and large budget deficits ernments sought to reduce their budget deficits as contribute to high real interest rates. a fraction of GNP as well as the rate of growth of Real interest rates were negative during the early the money supply. For the most part, they recog- part of the 1970s, but they rose sharply in the early nized that proposed reductions in the rate of 1980s. Even though they declined moderately from growth of the money supply would be credible 1982 on-and more sharply in 1985 and 1986-they only if associated with a reduction in the govern- remain high. During most recessions (particularly ment's need to borrow. those not associated with sharp monetary contrac- Despite high levels of unemployment, anti- tion), the private sector's demand for credit falls. inflationary strategies were maintained through- This usually encourages a decline in interest rates. out the recession of 1980-82. As a result, rates of But in the recession of 1980-82 and during the sub- inflation in the industrial countries subsided rap- sequent recovery, this pattern was not repeated, idly and in 1986 were at their lowest levels in largely because of the fiscal-monetary imbalance. twenty years. One consequence was that indebted developing But governments were more successful in reduc- countries received little relief from high real inter- ing the rate of growth of the money supply than in est rates. Their reliance on cheap finance in the cutting the public sector deficit. Some OECD coun- 1970s became a heavy burden in the 1980s as inter- tries gradually brought down the high deficits that est rates increased. Like most cumulative pro- had emerged in the late 1970s. But there were ex- cesses, the problem matured slowly, even after the ceptions, the most important of which was the steep rises in interest rates. But it finally became United States (see Table 2.2). pressing at the lowest point of the business cycle in Since 1981, tax cuts and expenditure growth mid-1982. This led to severe debt problems, the have increased the U.S. federal deficit to $200 bil- main theme of last year's Report. lion (nearly 4 percent of GNP), in spite of the re- covery after 1982. Indeed, at the peak of the busi- Capital flows, current account deficits, ness cycle, one would have expected the federal and trade flows budget to have been in approximate balance. But the deficit of the United States has persisted and Governments in industrial countries have gener- has been large enough to draw capital from other ally financed their increased deficits by borrowing countries. from domestic and external sources. Private do- 17 Box 2.1 Inflation as a tax The need for revenue may lead governments to in- kets, bank loans tend to be denominated in foreign crease the money supply. The resulting increase in in- currency, usually the dollar, so there is no real erosion flation erodes the real value of all financial assets, ex- of these assets as a result of domestic inflation. cept those that are fully indexed_creating what is In countries where the financial system is rudimen- termed the inflation tax. Debtors gain and creditors tary, the main financial asset is currency. Governments lose. In a credit market that is reasonably free, financial usually have a monopoly on issuing notes and coin assets that pay interest, such as bonds, are likely to (although there are exceptions: Liberia and Panama have a yield that compensates for any erosion in their use dollars), and the currency is held almost entirely real value caused by steady and foreseeable inflation. by domestic residents. Cash pays no interest, so the Unless bonds are indexed, however, a sudden or unex- erosion of its real value cannot be offset during infla- pected burst of inflation is unlikely to be compensated tion. Since notes and coin are a government liability for by suitably high nominal interest rates, and bond- and an asset of the private domestic sector, the reduc- holders will suffer an erosion of the real value of their tion in their real value is similar to a tax on currency. It assets. Since the main issuers of bonds are usually gov- reduces the outstanding real liabilities of government. ernments and the main holder is the domestic private There is a limit to the size of this taxation. The sector (although foreigners may also hold substantial greater the tax rate, the more those who are being amounts), a sudden or unexpected increase in the rate taxed try to avoid it. The higher the rate of inflation, of inflation will reduce the real value of the govern- the smaller the amount of money (in real terms) which ment's debt. The effect of inflation is analogous to the public will be willing to hold, and so the narrower levying a tax on bonds and using the revenue to pay the tax base. This can be seen in the extreme case of the off debt. last stages of hyperinflation, when people largely give In developing countries, however, the bond market up using money and switch to barter. Nonetheless, tends to be small and to have low, controlled interest although the tax base (that is, the quantity of money in rates. Most bonds are held by banks, primarily to sat- real terms) may become very small, the slow adjust- isfy reserve requirements; other bondholders are often ment of prices to the accelerating growth of the money involuntary lenders to government. In these circum- supply usually still guarantees some tax revenue. But stances bonds are rarely a principal source of financing when the pace of monetary expansion slows, revenues and thus will yield little tax in response to a sudden or can fall sharply. unexpected inflation. On the international capital mar- Theoretically, the maximum tax revenue from infla- mestic residents or foreigners buy additional gov- duced domestic investment or by increased foreign ernment papercurrency notes, Treasury bills, borrowing. During the recovery, however, private government bonds, or public depositsto finance investment increased at a faster rate than domestic the public deficit. savings, partly in response to earlier tax cuts that When foreign capital, attracted by high real in- favored investment. As a result, a growing propor- terest rates, finances the deficit, the result is a cur- tion of the financing burden of the increased bud- rent account deficit in the balance of payments. In getary deficit was borne by imports of capital. The 1985 in the United States, for example, the federal large current account deficit in the balance of pay- government deficit of about $200 billion was fi- ments reflected this (see Table 2.3). nanced to the tune of $87 billion by the financial The way the burden of financing a budget deficit surplus of the domestic private sector (including is shared among savings, investment, and capital state and local governments), but the remaining imports is determined by interest rates, expected $113 billion came from foreigners through the cur- returns on investment, and exchange rates. All of rent account deficit. these are, in important respects, determined by The funds to finance fiscal deficits must of neces- monetary and fiscal policies. Since 1981, when the sity come from one of three sources: increased do- U.S. budget deficit began to increase, the Federal mestic private savings, reduced private invest- Reserve Board has pursued a tight monetary pol- ment, or lower exports net of imports. In spite of icy. As a result, interest rates have been high by high real interest rates, the increase in the U.S. industrial-country standards. Although the nega- federal budget deficit in 1982 was not accompanied tive effect that high interest rates had on domestic by an offsetting increase in domestic private sav- investment was offset by the positive effects of ings. Thus, the deficit had to be financed by re- other policy changes, higher interest rates at- 18 tion is obtained when the proportionate increase in the thermore, inflation erodes other kinds of government price level equals the resulting reduction in real cur- revenue. Lags in the collection of taxes and delays in rency balances. Thus, at the margin, what the govern- adjusting some tax rates to rising prices mean that the ment gains from an additional notch of inflation is ex- real revenues of government fall as inflation increases. actly offset by people reducing their real currency In practice, this more than offsets any tax increase at- holdings. tributable to "bracket creep," and even tends to out- Many governments increase the money supply at a weigh the inflation tax itself. Except at low levels of rate far greater than that which would theoretically inflation, raising revenues by inflationary finance is maximize real public revenue. Although periods of likely to pay off only in the short run. high inflation occasionally occur accidentally, the main The lower and more stable the inflation, the more cause is usually the government's immediate need for likely it is that a government will be able to raise sub- cash to pay its bills. To obtain the cash, the govern- stantial resources by seigniorage. Seigniorage is the ment simply prints more money. benefit the central bank derives from being the monop- In more sophisticated monetary systems, checking oly supplier of domestic currency. Domestic residents accounts are important as a means of exchange. Banks will hold a larger stock of cash, in real terms, if prices usually pay little or no interest on checking accounts, are known to be stable. Such stability also makes a and so check balances are similar to currency. With currency attractive to foreigners whose own economies inflation, the banks are the immediate recipients of the are unstable and inflationary. This is vividly illustrated reduction in the real value of checking accounts, since by the substantial (and often illegal) foreign holdings these appear as liabilities on their balance sheets. But, of dollars by many Latin American countries. In by increasing reserve requirements or taxation, the Ghana, there were substantial holdings of, and trans- government usually acquires the banks' gains and pre- actions in, the CFA franc of neighboring Côte d'lvoire. vents them from profiting unduly from inflation. Because of the relative stability of their economies, the Like any other form of revenue raising, the inflation United States and Côte d'Ivoire were able to acquire tax must be judged on its merits. But inflation as a tax real resources in exchange for their currency notes. has disadvantages not shared by alternative forms of The desire of foreigners to share in Switzerland's sta- taxation. It distorts relative prices (because some prices bility has enabled Swiss banks to import capital at very increase faster than others), generates uncertainty, and low cost. These are the significant and continuing ben- falls heavily upon low-income holders of cash. Fur- efits of a stable financial system. tracted an unprecedented net inflow of foreign commitment to reduce the federal budget deficit capital. This, in turn, was one of the factors that during the next five years. The concerted efforts of contributed to the appreciation of the dollar rela- the Group of Five countries have also assisted in tive to other major currencies (see Table 2.3). bringing about an orderly adjustment. But a de- During 1985 and in early 1986, however, interest cline in the current account deficit or in the de- rates fell faster in the United States than in other mands of the United States on the world's savings industrial countries, and the dollar weakened, This will take time. This is due in part to lags in the partly reflects the recent strengthening of the U.S. process of adjustment as U.S. export and import Table 2.3 Current account balances and exchange rates in Germany, Japan, and the United States, 1981-85 Country and item 1981 1982 1983 1984 1985 Germany Current account balance (billions of dollars) -5.4 3.2 4.2 6.1 13.2 Exchange rate index 100.0 100.5 102.4 109.5 111.5 Japan Current account balance (billions of dollars) 4.8 6.9 20.8 35.0 49.7 Exchange rate index 100.0 105.7 97.6 93.6 93.2 United States Current account balance (billions of dollars) 6.4 -8.0 -40.8 -101.6 -113.6 Exchange rate index 100.0 93.6 90.7 86.9 86.7 Note: The exchange rate index is calculated relative to SDR 1981 = 100. Data for 1985 are estimates. Current account balance includes official transfers. Source: IMF. 19 substitution activities begin to expand in response the trade and current accounts in many developing to the weakened dollar. It is also apparent that cap- countries, particularly the heavily indebted ones. ital has been attracted into the United States be- But this was offset, in part, by higher world inter- cause of the country's political stability, low taxes, est rates. Although it is difficult to measure the net lack of exchange controls, and wage restraints. impact on developing countries, it is clear that The large current account deficit in the United those which adjusted most quickly and exploited States and high dollar interest rates have had the booming export market made a net gain. different-and offsetting-effects on the rest of the However, the export opportunities that existed world. Increased deficits stimulated the exports of, in 1983-84 for developing countries are unlikely to and thus the aggregate demand of, the United return unless other OECD countries expand im- States' trading partners. Countries that do not ex- port demand and thereby reduce their current ac- port to the United States also gained from the indi- count surpluses. Again, though, there is an offset- rect effects. Where there was spare capacity, this ting effect: if the U.S. budget deficit declines, promoted an increase in exports and GDP that, for interest rates will fall and capital hitherto absorbed some trading partners, more than offset the cost of by the government will be redirected to alternative higher interest payments. investments. This would provide increased oppor- Part of the increase in the U.S. current account tunities for those developing countries that have deficit since 1981 was mirrored by an improvement implemented the reforms necessary to attract for- in the current account balances of the rest of the eign lenders or investors. Capital could again flow OECD countries. For example, Japan's surplus voluntarily from OECD countries to more produc- rose sharply, reaching the equivalent of about 30 tive uses in developing countries-as it normally percent of the increased deficit of the United does. The OECD's current account surpluses and States. the developing countries' deficits would be as ra- Developing countries were also successful in tional and sustainable as their investments would capturing part of the buoyant U.S. demand, par- be profitable. ticularly in manufactures. Their manufactured ex- ports, which had close to zero growth in 1982, Public sector spending and controls grew by 10 percent in 1983 and by more than 16 percent in 1984. But the smaller increase in the One of the main causes of budget deficits in indus- U.S. current account deficit in 1984-85 was not off- trial countries, particularly in Europe, has been set by an expansion in the imports of other OECD burgeoning public expenditure. In all industrial countries. The result has been a marked slowdown countries, public spending expanded faster than in developing countries' export growth. In addi- GDP between 1964 and 1983 (see Table 2.4). Ex- tion, up until 1985 some of the newly industrial- cluding defense, the fastest growing items of pub- ized countries in Asia had lost competitiveness in lic spending were social benefits-health services, the U.S. market because their exchange rates did welfare, social security, and pensions. They are not depreciate in real terms against the dollar by as hard to cut because their size is dictated by the much as the exchange rates of their competitors in number of people claiming guaranteed (and usu- industrial countries. ally indexed) benefits. Interest payments on public The large increase in the U.S. current account debt have also grown much faster than GDP. deficit from 1981 to 1984 eased the adjustment of Governments in industrial countries have ex- Table 2.4 Total public expenditure as a percentage of GDP in selected industrial countries, 1964-83 Country 1964 1968 1972 1976 1980 1983 Canada 28.9 33.0 37.2 39.4 40.9 46.8 France 38.0 40.3 38.3 44.0 46.4 51.5 Germany 35.9 39.1 40.8 48.0 48.4 48.6 Italy 31.8 34.7 38.6 42.2 46.1 57.4 Japan 21.8 27.9 32.4 34.8 United Kingdom 33.6 39.2 39.8 45.6 45.1 47.2 United States 28.3 31.3 32.0 34.5 35.0 38.1 Average for all industrial countries 30.6 33.7 33.3 37.4 39.3 41.6 Source: OECD 1985c. 20 panded their subsidies to manufacturing (particu- Thus, the tax payment absorbs all of the $5 of real larly the steel and shipbuilding industries) in the income, and the marginal real tax rate is 100 per- hope of easing the strains of structural change. But cent. One result of the failure to reduce public it is the unanticipated rapid growth of subsidies to spending was, therefore, the erosion of incentives agriculture that has recently drawn most attention. for wealth creation. In the United States, agricultural production has Benefits. Along with the increase in tax rates been encouraged by a number of measures, in- came an increase in benefits. Again, it was not the cluding the setting of target prices above world level of benefits that mattered, but the marginal prices for wheat and corn. In Western Europe, in- loss of benefit as one moved into or out of employ- ternal prices of many agricultural products are ment. Other social benefits, from housing subsi- kept even further above world prices, and exports dies to free school meals, were also reduced or are subsidized. withdrawn as one earned additional income. The The result has been to encourage domestic pro- combined disincentive effects of the marginal tax duction and depress domestic consumption, espe- and benefit rates reached very high levels cially in Europe. The resulting flood of surplus particularly for those workers with average (or grain, sugar, meat, poultry, and dairy products at slightly below average) wage levels and with ordi- depressed world prices has been particularly dam- nary family commitments. Combined marginal aging to those developing countries that are trying tax-benefit rates of 85 percent became common. to stimulate the output of agricultural products in For some income groups the combined rate ex- which they often have an absolute advantage. The ceeded 100 percent. For example, in the United implications of these policies are the subject of Kingdom in December 1984 the combined mar- Chapter 6 in Part II of this Report. ginal tax-benefit rate for a married man with two In the 1980s, governments made numerous at- dependent children and an income between one- tempts to cut public spending but had little suc- half and two-thirds of the average wage reached cess. The rates of growth of public expenditure 180 percent. At such high rates, it pays people not have been cut, but this has not reduced on average to work. the level of overall spending either absolutely or Regulations and controls. A proliferation of reg- relative to GDP. ulations and controls sharply increased business Higher public spending and greater public sector costs and introduced distortions. For example, involvement in the economy were indirectly re- with the aim of promoting jobs in areas of high sponsible for other problems that hindered growth unemployment, governments directed capital in the industrial countries: through planning controls and fiscal incentives. Marginal tax rates. In the 1950s and 1960s, Unfortunately, capital investment was channeled many governments thought that high public into industries which could not survive without spending would not only offset cyclical downturns government subsidies. As a result, capital- but also promote long-term expansion in GDP. intensive, rather than job-intensive, industries That view lost favor, however, after the experience were attracted to these areas, which created low- of the 1970s, when growth in GDP faltered but the productivity capital but few jobs. growth in public spending did not. The higher Of more importance has been the increase in level of public spending meant that average rates government intervention in the labor market, of taxation had to increase. What mattered more which created damaging rigidities in the wage than the average tax rate, however, was the extent structure. In addition to specifying minimum wage to which tax varied with changes in income and levels, governments reduced the flexibility of man- wealththe marginal rate of tax. To preserve a agement to change conditions of employment. "progressive" tax structure (that is, one in which Employment protection measures often protected the better-off pay proportionately more tax), mar- incumbents, but at the cost of hindering the crea- ginal tax rates had to increase by at least as much tion of new jobs with higher productivity. as average tax rates. In real terms, marginal tax Controls and regulations were more common in rates on interest income often exceeded 100 per- Europe than in the United States and Japan. The cent. For example, if interest rates are 20 percent resulting market rigidities and the erosion of in- and inflation is 15 percent, the real return on a centives were widely acknowledged in the 1970s to marginal investment of $100 is $5. But if tax is lev- be slowing growth in Europe. This weaker perfor- ied at a marginal rate of 25 percent on the nominal mance had important effects on developing coun- yield of $20, the income net of tax is only $15. tries too. European growth had been an important 21 factor in the growth of world demand in the 1960s. Protection. Although the 1980s have seen The halving of that growth from the level of the steps, however slow and hesitant, to dismantle do- early 1970s was a significant change in the interna- mestic constraints to efficiency, the restrictions on tional economy, and it made the problems of ad- international trade have increased. This reverses justment that much more difficult in both Europe the long process of reducing trade restrictions and and the developing countries. jeopardizes the principle of nondiscrimination that By the 1980s, as Europe's unemployment rate was pursued so successfully in the 1960s. increased to levels not seen since the 1930s, Euro- Most of the increase in protection has taken the pean governments began gradually loosening con- form of nontariff barriers (NTBs). Table 2.5 shows trols and regulations. They have also made consid- how NTBs on the imports of industrial countries erable progress in financial deregulation and in increased between 1981 and 1984. The NTBs in reducing the scope of credit rationing. 1984 affected $9.4 billion more imports (based on Box 2.2 Protectionism: who pays? It is often claimed that tariff and nontariff barriers to income, a loss that is variously described by econo- trade are justified as a way of saving jobs in domestic mists as an efficiency loss, a welfare loss, or a dead- industries. But protection has many direct and indirect weight loss. If protection is proposed as a means of effects that need to be considered. Nontariff barriers saving jobs, then the question arises as to how much against imports result in higher domestic prices for the real national income needs to be sacrificed to do so. products that substitute for imports. Although the do- The efficiency losses or costs of nontariff barriers mestic industries producing these substitutes may used by the United States and the EC against imports of gain, consumers or industrial users of the products clothing, automobiles, and steel have been estimated lose. The net result is always a loss in real national at well above a billion dollars in each case (see Box Box table 2.2 Effects of selected nontariff barriers in the clothing, automobile, and steel industries (millions of dollars, unless otherwise noted) Clothing Automobiles, Steel, United States, EC, United States, United States, Effect 1980 1980 1984 1985 Efficiency loss in the protecting country 1,509 1,409 2,192 1,992 Increased payments on imported goods 988 1,050 1,778 1,530 Loss of consumer surplus on imports 408 289' 229 455 Resource cost of producing the additional quantity domestically 113 70 185 7 Jobs saved through protection (thousands) 8.9 11.3 45.0 28.0 Efficiency loss per job saved (thousands of dollars) 169.6 124.7 48.7 71.1 Average labor compensation (thousands of dollars per year) 12.6 13.5 38.1 42.4 Ratio of efficiency loss to average compensation 13.5 9.2 1.3 1.7 Lost revenues for exporters 9,328 7,460 6,050 1,508 Ratio of increased payments on imported goods to lost revenues for exporters 0.11 0.14 0.29 1.01 Note: The nontariff barriers are: for textiles, the Multifibre Arrangement; for automobiles, the voluntary export restraint (VER) agreement between the United States and Japan; and, for steel, the VERs between the United States and major suppliers. a. Excludes tariff revenues forgone because of quotas. Source: Kalantzopoulos, "The Costs of Voluntary Export Restraints" (background paper). 22 Table 2.5 Share of imports subject to nontariff barriers in industrial-country markets, 1981 and 1984 Percentage of imports from: Industrial Developing countries countries Market 1981 1984 1981 1984 EC 10.3 10.7 21.1 21.7 Japan 12.3 12.4 14.5 14.5 United States 7.2 9.2 12.9 16.1 All industrial countries 10.5 11.3 19.5 20.6 Note: Data are based on 1981 weighted averages for all world trade in all products except fuels. Nontariff barriers do not include administrative protections such as monitoring measures and antidumping and countervailing duties. Source: World Bank estimates based on UNCTAD data. table 2.2). However, the number of jobs saved in the Existing import restrictions in the United States may protected industries was small, so that the cost per job amount to as much as a 66 percent surcharge on lower- saved exceeded the average labor compensation in income families, but only a 5 percent surcharge on each case. For each job saved in clothing, for example, higher-income families. the U.S. economy as a whole sacrificed about $169,600 to protect a worker earning about $12,600. Clearly, the resources wasted in the process could have been better Box figure 2.2 Income tax surcharge equivalent of the used in other activities and in retraining and reallocat- cost of tariff protection in the United States, 1984 ing the affected workers. This example demonstrates that saving jobs is not a tenable defense of protectionism. Income tax surcharge equivalent (percent)' It is also sometimes thought that foreign producers 70 do not necessarily lose from nontariff barriers, espe- cially under so-called voluntary export restraints, since those who are able to sell despite the barriers receive higher prices. While the higher prices paid for imports represent a transfer to some foreign producers, non- tariff barriers reduce the volume of imports and thereby lead to losses in the total revenue received by foreign producers. In the case of clothing, for example, the transfer to foreign producers amounted to only one-tenth of their loss of revenue in 1980. Only in the case of steel in 1985 was the price increase large enough to offset the loss in export volume. Not only is protectionism very costly, it does not assist poorly paid workers. Indeed, it penalizes them. Import restraints are equivalent to a sales tax and often apply to necessities. When they do, they weigh heavi- est on those who spend proportionately more of their income on these items: the poor. The impact of such a sales tax on different income groups can be seen by 70 94 11.7 14.1 16.4 18.7 23.4 28.1 35.1 46.8 58.5 treating the tax as a surcharge on income tax. Box fig- Income group (thousands of dollars per year) ure 2.2 does so by weighting the price increases caused by protective measures on clothing, sugar, and auto- Note: Income groups are based on the 1972-73 consumer expenditure survey of the U.S. Department of Labor and are adjusted for con- mobiles in the United States in 1984 by the average sumer price inflation in 3984. amount that different income groups spent on those a. Cost of protection as a percentage of income divided by the applica- goods. It shows the regressive effect of the protection ble federal income tax rate. Source: Hickok 1985. tax and the distortionary effect on income distribution. 23 1981 weighted averages) than did those in place in tion of jobs, and prolong the decline of uncompeti- 1981. Moreover, this figure understates the in- tive industries (see Box 2.2). crease because it takes into account only new re- strictions, not the effects of tightening existing The developing countries ones. Although the NTB coverage for the United States has declined since 1984 as a result of the In the first half of the 1980s, real GDP growth lifting of voluntary export restraints on Japanese slowed throughout most of the developing world, automobiles, the decline has been offset by in- and per capita incomes declined in many coun- creased protection for the U.S. steel industry. tries. At the lowest point of the recession, in 1982- Restrictions have been imposed on a larger num- 83, GDP growth fell to 2.0 percent (see Table 2.6). ber of small trade flows from developing countries Although the growth in GDP quickened signifi- and a smaller number of large trade flows from cantly in 1984, it slowed again in 1985 and during industrial countries. In 1984, 20.6 percent of indus- the first part of 1986. trial countries' imports from developing countries But averages conceal wide differences in individ- were subject to NTBs-nearly two times the corres- ual performances. One of the most worrisome as- ponding figure for imports from industrial coun- pects of the early 1980s has been the continued tries. This was primarily due to restrictions on the decline in low-income African countries. Inappro- clothing, textile, and footwear exports of develop- priate domestic policies, a weakening of their ing countries. The tightening of existing NTBs on terms of trade, and reduced capital inflows have these items continues to restrict developing coun- resulted in low, and even negative, growth rates. tries' most important manufactured exports. But The average annual GDP growth rate for low- recent NTBs have also been imposed on such income Africa declined from 2.7 percent during products as steel and electrical machinery- 1973-80 to 0.7 percent in 1982 and reached a record products which developing countries are begin- low of 0.2 percent in 1983. Although growth ning to export. So, while developing countries picked up in 1984 and 1985, per capita incomes have been encouraged to open their economies to have continued to decline. trade, their access to the markets needed to obtain Two groups of middle-income countries were the most benefit from trade liberalization has been also hard hit. First, oil exporters-hitherto pro- restricted. tected from external energy shocks, if not from in- It is a widely recognized irony that, although the appropriate domestic policies-faced lower oil prosperity and high level of employment of the prices and falling export volumes. As a result, real 1960s were made possible in part by the disman- GDP, which had grown by 5.8 percent a year in tling of trade restraints, protectionism is now ad- 1973-80, fell by almost 2 percent in 1983 and has vocated on the grounds that it will create jobs. In grown by less than 3 percent in every year since point of fact, it will delay recovery, inhibit the crea- 1981. Second, heavily indebted countries that had Table 2.6 Real growth of GDP, 1965-85 (annual percentage change) 1965-73 1973 -80 Count ry group average average 1981 1982 1983 1984 1985 Developing countries 6.6 5.4 3.5 2.0 2.0 5.4 4.4 Low-income countries 5.6 4.7 5.0 5.3 7.8 9.4 7.8 Africa 3.9 2.7 1.7 0.7 0.2 0.7 2.1 Asia 5.9 5.0 5.4 5.8 8.6 10.2 8.3 China 7.8 5.4 4.9 7.7 9.6 14.0 10.6 India 4.0 4.1 5.8 2.9 7.6 4.5 4.0 Middle-income oil exporters 7.1 5.8 4.4 1.0 -1.9 2.5 2.5 Middle-income oil importers 7.0 5.5 2.1 0.8 0.8 4.1 3.0 Major exporters of manufactures 7.6 5.9 1.6 1.2 0.8 4.4 3.1 Brazil 9.6 6.8 -1.5 1.0 -3.2 4.5 7.0 Other middle-income oil importers 5.4 4.5 3.4 -0.6 0.8 3.1 2.8 High-income oil exporters 9.2 7.7 1.6 -1.7 -7.1 1.3 -5.0 Industrial market economies 4.7 2.8 1.9 -0.6 2.3 4.6 2.8 Note: Data for developing countries are based on a sample of ninety countries. 24 Table 2.7 Change in export prices and in terms of trade, 1965-85 (annual percentage change) 1965-73 1973-80 Count ry group average average 1981 1982 1983 1984 1985 Change in export prices Developing countries Food 5.0 9.6 -8.2 -8.8 5.6 2.0 -8.1 Nonfood agriculture 4.2 10.5 -14.4 -8.6 5.7 -2.0 -10.0 Metals and minerals 2.4 4.8 -7.6 -8.5 -0.1 -1.7 -4.9 Fuels 7.9 27.2 12.5 -3.2 -12.4 -2.1 -2.5 Manufactures 7.2 8.1 0.2 -3.2 -2.5 -1.9 1.3 Industrial countries Manufactures 5.4 11.0 0.5 -1.4 -2.6 -1.8 1.3 Change in terms of trade Low-income countries Africa 0.1 -1.8 -11.8 -0.9 4.8 5.0 -5.6 Asia 3.2 -2.4 1.1 1.2 -1.2 1.5 -1.9 Middle-income countries Oil exporters -0.4 8.5 5.4 0.2 -7.7 0.3 -2.9 Oil importers 0.0 -3.0 -4.4 -0.6 2.3 0.1 -0.1 All developing countries 0.8 1.5 -1.0 -0.1 -1.3 0.4 -1.1 Note: Data are based on a sample of ninety developing countries. riot used borrowed funds efficiently were caught reason to hope for a revival in growth and a remis- by rising interest rates, falling voluntary private sion of the debt problem. World merchandise trade lending, and declining export earnings. Per capita volumes increased by 9 percent. Developing coun- incomes and imports fell sharply in some of the tries increased their export volumes by 10.7 per- biggest debtors, particularly in Latin America. cent and benefited from a slight (0.4 percent) im- By contrast, those more outward-oriented econ- provement in their terms of trade. For many omies (such as Korea and Malawi) that maintained developing countries the extra export earnings and domestic macroeconomic stability and adjusted to rescheduling of existing debt permitted the first external changes were soon able to reattain high increase in per capita incomes and imports since growth rates after 1982. India and China also con- 1980. Those countries which had already imple- tinued to grow vigorously, pushing up the overall mented significant domestic reform programs, growth rate for low-income countries in Asia. If particularly the reduction of disincentives to ex- India and China are excluded from the low-income ports, gained most-Mauritius, Thailand, and Tur- Asia group, the average growth rate for the region key, for example. since 1980 falls to approximately 5.0 percent. In 1985, however, the hopes of 1984 were moder- India benefited from domestic policy changes as ated. Slower growth in industrial countries and in well as from a large, expanding domestic market world trade reduced the rate of growth of and good harvests; these offset, to some degree, developing-country exports, and commodity fluctuations in the world economy. This was also prices fell (see Tables 2.7 and 2.8). The expansion true in China, but its economy gained more from in total world merchandise trade slowed markedly far-reaching domestic reform. While there are re- to 3 percent, breaking the normal relationship in cent signs that the challenge of managing mone- which total trade expands at a faster rate than total tary and fiscal policy in a more open economy may world production. World market prices, particu- have introduced a degree of macroeconomic insta- larly of primary commodities, also declined. Over- bility, China's strong growth provides a vivid illus- all, the terms of trade for developing countries de- tration of the potential gains to be made from un- clined by 1.1 percent in 1985; low-income countries dertaking domestic reforms that raise the and oil exporters fared the worst. As net capital productivity of existing resources. A detailed anal- flows into developing countries also declined, ysis of the Chinese policy changes in agriculture is many governments were forced to slow the provided in Chapter 5. growth in imports. In 1984, oil-importing developing countries had Although many developing countries have 25 Table 2.8 Growth of exports from developing countries, 1965-85 (annual percentage change) 1965-73 1973-80 Item average average 1981 1982 1983 1984 1985 Change in export volume by commodity Manufactures 11.6 13.8 8.6 0.1 10.0 16.6 3.3 Food 3.3 3.9 9.7 -2.3 -1.1 7.6 3.9 Nonfood agriculture 3.1 1.1 2.5 -1.6 1.5 1.0 4.5 Metals and minerals 4.8 7.0 -2.6 -2.8 0.5 3.4 4.8 Fuels 4.0 -0.8 -9.2 0.6 2.3 7.1 -1.4 Change in export volume by country group Low-income countries Africa 4.6 1.3 -4.5 -9.3 -0.2 4.9 2.0 Asia 0.6 6.8 9.1 6.3 7.2 6.6 3.8 Middle-income countries Oil exporters 4.3 0.0 -7.2 -1.9 3.6 8.6 -0.8 Oil importers 7.1 9.0 7.4 -0.4 5.0 12.8 3.7 All developing countries 5.0 4.6 2.1 -0.5 4.7 10.7 2.3 gained from the recent decline in interest rates and growth inevitably slows down when adjustment is oil prices, the situation for others has worsened not undertaken. And, over the longer term, the considerably. For a group of low-income African divergent performance of developing countries countries, the deterioration in their terms of trade, faced with similar external trends points to the declining private capital flows, and the increasing overriding importance of domestic policy. Those proportion of their debt that is ineligible for resche- countries that have used external resources to facil- duling have combined to create a serious problem. itate adjustment to changed external circum- Things are no better for many middle- and high- stances have been able to resume growth after a income oil exporters, because they bear the direct brief slowdown. Those that continually borrowed costs of the rapid decline in oil prices. In addition, to avoid making changes often found that debt ac- the slowdown in their growth rates has had nega- cumulated without contributing to the increased tive effects on those developing countries that sup- output needed to service it. ply them with migrant laborers. In some develop- Table 2.9 provides one measure of how closely ing countries, remittances from migrant workers growth is related to domestic policy, as measured are a significant source of foreign exchange earn- by the level of investment and the efficiency with ings. But the reduction in remittances has been which resources are used. It lists net investment as mitigated by the lower cost of oil imports and the a proportion of GDP and the capital used per unit decline in interest rates. of extra output for twenty-four developing econo- At the end of 1985, some countries faced consid- mies. The ten economies with the lowest rates of erable short-term constraints on the resources that growth had an average rate of net investment of they could earn or borrow from abroad. As dis- only 10.8 percent of GDP, whereas net investment cussed at the end of this chapter, this has serious in the high-growth economies was 18.4 percent. implications for developing countries in the near The low-growth economies also used twice as term. But in the medium term it is how efficiently much capital to produce each extra unit of GDP resources (whether domestic or foreign) are used than did the high-growth ones. It was estimated which determines a country's economic perfor- that the inefficient use of resources, measured by mance-and this, in turn, depends upon domestic the high incremental capital-output ratio, is a more policy. It is to that issue that we now turn. significant determinant of performance for the group of ten low-growth economies than the level Domestic policies of net investment. The fact that countries in both groups experi- Developments in the world economy during the enced similar changes in their external circum- early 1980s have obviously made it more difficult stances indicates that domestic policies are of pri- for developing countries both to adjust and to mary importance in determining performance over maintain growth in the near term. However, the medium term. Previous World Development Re- 26 ports have argued that developing countries bene- enced a decline in tax receipts. But many govern- fit if they adopt: ments could increase their tax receipts without im- Stable monetary and fiscal policies-that is, pairing the efficiency of their economies. For policies necessary to ensure that their budget and example, trade reforms such as replacing quotas current account deficits are sustainable. with tariffs, auctioning import licenses, and reduc- Microeconomic policies that minimize price ing high tariffs and exemptions can often increase distortions in goods and factor markets largely by revenue and reduce distortions. opening the economy to international trade and How governments raise revenue determines the abandoning discrimination against agriculture. efficiency effects of the tax system. As in industrial Appropriate and stable real exchange rates. countries, high marginal tax rates can have far- reaching negative effects. Not only do they en- MONETARY AND FISCAL POLICIES. During a reces- courage tax avoidance and the proliferation of tax sion, public revenues fall and public spending of- exemptions, but also they are distortionary and, as ten rises. This increases the budget deficit and the a result, do not accomplish the objectives of raising need for extra finance. The more severe the revenues or improving income distribution. In recession-such as that of 1980-82-the more early 1986, Jamaica undertook tax reforms to ad- pressing the need. Since 1980, with the exception dress these problems. By adopting a single per- of 1984, many developing countries have experi- sonal income tax rate above a threshold level, the Table 2.9 Growth, net investment, and capital-output ratio in twenty-four developing economies, 1960-84 Average annual Net Incremental percentage investment ca pita!- change in GDP (as percent- output Country or territory per capita' age of GOP)5 rat Economies with low growth Ghana -1.7 6.4 12.1 Somalia -1.0 12.6 8.6 Zambia -0.5 13.6 7.9 Jamaica 0.3 16.7 13.0 Chile 0.6 11.7 7.4 Peru 0.7 9.8 4.7 Mali 1.0 11.0 4.8 Argentina 1.3 14.0 7.0 Bolivia 1.3 8.8 4.0 Uruguay 1.7 6.0 5.3 Group average 0.4 10.8 7.2 Economies with high growth Philippines 2.5 16.8 4.3 Malawi 2.6 17.3 4.3 Colombia 2.7 13.6 3.9 Turkey 3.1 13.8 3.6 Dominican Republic 3.3 12.9 3.1 Mexico 3.4 15.7 3.3 Malaysia 4.3 16.4 3.3 Brazil 4.4 19.3 3.7 Thailand 4.5 17.4 3.3 Greece 4.6 18.2 4.5 Hong Kong 6.1 26.6 3.9 Korea 6.4 17.0 2.7 Botswana 7.3 28.6 3.2 Singapore 7.4 23.8 3.3 Group average 4.5 18.4 3.6 The exponential real growth rate per capita averaged over the period. Calculated as gross domestic investment minus depreciation divided by GDP averaged over the period. Calculated as the ratio of the average annual share of gross investment in GDP to the exponential real growth rate of GDP for the period.This ratio cannot be derived from the first two columns because it does not use per capita growth rates or the same definition of investment. Source: Cavallo, Cottani, and Khan (background paper). 27 government eliminated high marginal tax rates as nomic stability is needed to achieve sustained well as many complex exemptions. This reduced growth. This lesson is particularly relevant to the the distortionary effects of the income tax system oil-exporting countries that are struggling to bring and the discrimination against lower income public expenditure in line with the recent drop in classes. Another desirable reform that many devel- oil prices and the inevitable decline in public reve- oping countries could undertake is to broaden the nues. tax base away from border taxes (especially on ag- At least as important as the level and growth of ricultural exports) and simultaneously lower mar- public spending is the use to which these re- ginal tax rates. This would make their economies sources are put. Many overambitious public in- more efficient and reduce the impact that volatile vestment programs included large, expensive commodity prices have on tax revenue. projects which yielded low returns. To some ex- The main fiscal problem, though, is spending. tent, the slower growth of developing countries in As in industrial countries, public spending in the the 1980s reduced the actual return on some public developing countries remained high during the investments, particularly in the energy field, even early 1980sand in many cases increased in real though they may have been attractive at the plan- terms. In most developing countries increased ning stage. But many projects would have had low government expenditures led to record fiscal defi- rates of return even under normal conditions. cits in 1982 and 1983. Although both spending and These projects were not only unproductive in com- deficits have since fallen, even the reduced levels parison with other projects, but they utilized re- of 1985 are unsustainable in the long run. Spend- sources that would have been more productive if ing cuts were often made in the areas of mainte- directed to operation and maintenance programs. nance and investmentwhich will slow medium- Such programs are essential in keeping the exist- term growthand many heavily indebted ing capital stock working efficiently. In much of countries are finding it difficult to reduce current sub-Saharan Africa, the basic infrastructure expenditures further because of large interest pay- highways, waterworks, railroads, and poweris ments on outstanding debts. The burden that this in an alarming state of disrepair. places on the budget is particularly heavy for those Cuts in public investment, and ever-larger pro- economies which failed to direct the previously portionate decreases in maintenance expenditure, borrowed funds into efficient activities, which were often the results of the exigencies of stabiliza- would have increased output and thereby the tax tion programs. But, just as in industrial countries, base. As few developing countries have full- many large items of current expenditure were not fledged bond markets, most governments have fi- reduced. These included spending on government nanced their budget deficits (after deducting over- employees, defense, and state pensions, as well as seas aid) by borrowing from the banking transfers and subsidies to state enterprises. One of systemor by printing money. the main policy issues, therefore, is how to control Large increases in the money supply, generated popular government programs while at the same by fiscal deficits, have been the main cause of the time ensuring that the essential role of government rapid increase in inflation in most Latin American is performed efficiently. and some African and Middle Eastern countries during the 1980s. Governments and central banks DISTORTIONS AND GOVERNMENT POLICIES. Since have sometimes tried to suppress the symptoms of few governments have been able or willing to inflation by overvaluing domestic currencies and broaden the tax base, higher public spending has controlling prices of politically sensitive goods or been financed domestically partly by accelerated services. This has added to the public sector deficit inflation but mainly by increasing marginal rates of and thus has exacerbated, rather than reduced, in- taxation. In developing countries, as Part II argues, flation. In contrast, some low-income countries in the burden of higher marginal tax rates falls heav- Asia (for example, India and Indonesia) have pur- ily on agriculture, either implicitly or explicitly, sued prudent fiscal and monetary policies and re- and domestic manufacturing is often subsidized. duced their inflation to more manageable levels. This antiagriculture (and often antiexport) bias As in industrial countries, governments in devel- weakens incentives to invest in a sector in which oping ones have found it easier to increase budget developing countries are frequently competitive spending and the rate of monetary growth than to agriculture. These price distortions are probably reduce them. However, as developing countries most serious in Africa because of overvalued ex- with high inflation rates have learned, macroeco- change rates and the operation of compulsory mar- 28 keting schemes for export crops. As China's recent ally begin with extra indexation and more frequent experience has shown, developing countries can adjustment of controlled interest rates. For exam- attain much faster rates of growth by correcting ple, countries such as Argentina, Brazil, and Chile policy-induced price distortions. Some reforms, have reduced controls on interest rates. As a result such as lower, more uniform tariffs or the abolition of continued budget deficits, tighter monetary pol- of maximum prices on domestically produced sta- icy, and restricted inflows of foreign savings, inter- ple foods, can be implemented without any loss of est rates in these countries have risen and are often tax revenue. Indeed, revenue can be increased. high in real terms, If supported by credible macro- Labor markets are no less distorted in develop- economic policies designed to restore and main- ing countries than they are in industrial ones. tain stability, these high rates will encourage the Wage costs to employers in the formal sector have required increase in domestic savings. Adjustment often been raised because of legislative interven- of interest rates on deposits is also necessary to tions by governments. For example, minimum stem capital flight, a significant problem in a num- wage laws and regulations against layoffs, ostensi- ber of heavily indebted countries. But, although bly designed to protect poorer workers, have bene- tentative reforms have been started, few develop- fited (when effective) better-off workers in the for- ing countries have capital markets which generate mal economy at the expense of output and jobs. or allocate credit efficiently. Wage indexation has slowed the adjustment of real wages to changes in the terms of trade and has EXCHANGE RATE AND TRADE POLICY. Governments made it harder to reduce inflation. in developing countries intervene in the conduct of Although some wage indexation schemes have international trade and commerce by means of a been dismantled, the reform of labor markets has host of measures such as exchange rate manage- been slow. High wage costs and subsidized capi- ment, import tariffs and restrictions, export taxes, tal, especially in the formal economy, reduce out- and exchange controls. These trade-affecting poli- put and encourage the substitution of capital for cies have a powerful influence on the patterns of labor. This not only leads to lower rates of job crea- domestic production and consumption and thus tion, but also limits growth, because investment is on efficiency and growth. used to substitute for labor rather than to expand Many governments have tried to maintain their capacity. official domestic exchange ratesparticularly in Nearly all developing countries control interest the face of changing international economic rates and ration credit according to various "plan- conditionsby supporting them with restrictive fling priorities." Low interest rates on bank de- trade and exchange controls and foreign borrow- posits (often below the rate of inflation) depress ing. An overvalued exchange rate depresses the savings and encourage the holding of physical as- price of tradable goods relative to that of non- sets. This stifles the development of the financial traded goods and encourages expansion of the sector. In the early 1980s, Mexico provided an ex- nontraded sector at the expense of the tradable ample of how much financial markets can suffer. In sector. If the government also protects import- this period about 60 to 70 percent of credit in Mex- competing goods, the disincentive to export pro- ico was administratively allocated or subsidized. duction is even stronger. As a result, most of the credit was channeled to The case for adjusting the exchange rate to reflect relatively inefficient public enterprises or agricul- changes in external factors, such as a lasting shift tural programs, and the private sector was left to in the terms of trade, seems clear. If the price of a compete for the remaining smaller share of nonal- country's exports declines, the preexisting equilib- located or nonsubsidized credit. This inevitably rium in terms of the domestic price level and em- drove up real interest rates in the "free" market to ployment can be maintained only by running more than 30 percent, crowding out relatively down reserves or by borrowing from abroad. If the profitable private sector investments. Distortions change in export prices is permanent, this is not a in credit markets have been increased by rapid in- sustainable strategy. If domestic prices and wages flation, as the experience in Latin America during do not adjust downward, the exchange rate will the 1970s illustrates, because governments are of- have to be devalued. Oil-exporting countries, as ten reluctant to allow interest rates to rise to a com- they come to grips with the decline in oil prices, mensurate level. face this issue. It is also clear that if the domestic Many developing countries have recognized the inflation rate is higher than those of one's trading need to reform their credit markets. Reforms usu- partners, an adjustment in the nominal exchange 29 rate will be needed to maintain competitiveness. goods). By changing the relative domestic demand What is less obvious is that domestic policies and supply of nontraded and traded goods, com- which seem to be unrelated to the exchange rate mercial policy, monetary and fiscal policy, and cap- may also have a significant effect on the real ex- ital inflow all affect the real exchange rate. Unless change rate (defined here as the ratio between the exchange rate policy is compatible with these poli- price of traded goods and the price of nontraded cies, an unsustainable current account imbalance Box 2.3 Inconsistency in macroeconomic policymaking: the case of the Philippines, 1980-83 In 1980, after a decade of rapid growth, the Philippine been removed on schedule. A number of export pro- economy confronted problems of short-term stabiliza- motion schemes had been introduced to offset, to tion and longer-term structural adjustment. The cur- some degree, the remaining bias against exports. rent account deficit (which had been negligible earlier However, beginning in late 1982 the pace of liberali- in the decade) rose to 5 percent of GNP by 1979 and zation slackened, and in some cases measures were was financed mostly by heavy foreign borrowing. reversed. Why? Undoubtedly, external factors made High and variable protection diverted resources from adjustment more difficult. By the first quarter of 1984 agriculture and traditional exports, areas in which the the Philippines' external terms of trade were 53 per- Philippines has a comparative advantage, toward rela- cent lower than in 1973 and 16 percent below their tively inefficient activities. Growth in GDP was previous low in 1977. High interest rates and protec- achieved, hut at a high cost. Each additional unit of tionism in potential export markets worsened the cur- output required about 35 percent more capital than in rent account balance. But what turned a difficult eco- comparable Asian countries. nomic situation into an unsustainable one was the These problems were exacerbated by the downturn government's domestic macroeconomic policy. in the world economy after 1979. The government's Until 1983, partly because they expected an early re- ability to delay further adjustment by borrowing more sumption of world economic growth, the Philippine was limited by large existing debt obligations that authorities continued to expand public spending and weakened the country's creditworthiness. In 1980, to finance it through foreign borrowing. As a result, therefore, the government began to implement a com- the budget deficit increased from 1.3 percent of GDP in prehensive series of reforms. One of the main compo- 1980 to 4.2 percent in 1982, and the current account nents was a trade liberalization program designed to deficit grew from 5.8 percent in 1980 to 8.0 percent by reduce the level and variance of effective protection to 1982. Most of the increase in public spending was due production activities so as to increase efficiency and to investments made by relatively inefficient public improve the allocation of resources. The aim was to corporations. They accounted for 60 percent of total stimulate exports so that the economy could expand public investment, and since only 15 percent was fi- without being constantly constrained by the current nanced domestically, large foreign loans were re- account deficit. quired. As a result, the public sector's share of By the end of 1982 the government had made medium- and long-term debt increased from 50 per- progress in implementing the first stage of the pro- cent in 1974 to an average of 74 percent in 1979-82. gram. By reforming import tariffs and adjusting the The government compounded the problems created system of domestic sales taxes (see Box table 2.3), the by its expansionary fiscal policies by adopting an ex- government had succeeded in lowering effective pro- change rate which was not consistent with the opening tection rates (EPR5) and in making them more uniform up of the economy. Given the declining terms of trade across activities. Most quantitative restrictions had and the liberalization program, an exchange rate deval- Box table 2.3 Effective protection rates, 1979 and 1985 Average EPRs Standard (percent) deviation Sector 1979 1985 1979 1985 All' 14 8 53 35 Primary and agricultural -2 -5 29 21 Manufacturing 27 20 53 32 Exports 11 -10 15 12 Importables 43 29 104 51 a. EPRs include the effect of sales taxes on protecting domestic production Source: Philippine Institute of Development Studies. 30 will occur, which will have the same effect on an ment, and exports during the period 1960-83. economy as a change in the terms of trade. While it is difficult to define misalignment pre- A recent study investigated the effects of real cisely, in this case a counterfactual example was exchange rate misalignment and instability on eco- used to define what the real exchange rate would nomic performance. The study examined the im- have been had sustainable domestic policies been pact of these two factors on growth, net invest- pursued. Real exchange rate instability was de- fined as the coefficient of variation (that is, the var- iance of the rate relative to its mean). The results are shown in Figures 2.3 and 2.4. The study found that, on average, a 10 percent increase in the misalignment of the real exchange uation would have been necessary to maintain a sus- rate was associated with a GDP growth that was tainable current account. Moreover, since the currency was overvalued before 1980, even holding the real ex- change rate at that level would have been inappro- priate. But between the first quarters of 1979 and 1984 Figure 2.3 Exchange rate misalignment and the real exchange rate appreciated by 17 percent. This real GDP growth in twenty-four developing undermined the trade reforms. What was needed was economies, 1960-83 real devaluation. A real devaluation would have par- tially compensated existing efficient manufacturers of Real GDP growth rate (percent) import substitutes for the effect of reduced tariffs and, 9 more important, would have provided a uniform stim- ulus to new exporters and new manufacturers of im- Singapore port substitutes. 6 Korea Thailaid The appreciation of the exchange rate and the widen- Malaysia Greece Argentina Brazil ing public sector deficit discouraged domestic savings Mexico1 Dominican Republic Turkey and reduced the flow of controlled credit to the private Malawi Philippines sector. As expectations of a devaluation increased and the government kept deposit interest rates low, do- mestic savings declined. As in many other countries, 0 Bolivia I Ethiopia Zambia \\ Sudan Uruguay Peru Mali Côte d'lvoire Chile the more obvious it became that the status quo could S Jamaica Somalia not be maintained, the greater became the incentive to 3 transfer savings abroad. This, in turn, exacerbated the pressure on the external account. 8 0 8 16 24 Real exchange rate misalignment (percent) The inconsistency between the policy of liberaliza- tion on the one hand and the monetary, fiscal, and Source: Cavallo, Cottani, and Khan (background paper). exchange rate policies on the other brought about a crisis in 1983. The government responded by delaying or reversing some of the liberalization measures. In December 1982 a 3 percent import surcharge was im- Figure 2.4 Exchange rate instability and net posed as an "emergency" measure. By the end of 1985 investment in twenty-four developing it had been increased to 5 percent and an additional I economies, 1960-83 percent tax had been imposed on foreign transactions. Net investment as a percentage of GD!' The second phase of the program to reduce quantita- 25 tive restrictions on imports was also delayed. The mo- Singapore mentum for reducing trade taxes was lost as the gov- ernment attempted to raise revenue and reduce the 20 growth in imports. Also, although some export incen- Greece Brazil Malawi Jamaica tives were increased, most of the benefits were cap- S Korea Philippines tured by existing exporters, especially exporters of 15 Thailand Male Mexico Argencina... electronics. As Box table 2.3 shows, the same pattern Colombia S S Turkey S of distortions remained in 1985, including the strong Zambia Chile S Dominican Republic Somalia bias against exports, particularly agricultural and pri- 10 Côte d'IvoireS.4ali Peru mary goods. Faced with worsening domestic and ex- Sudan S Bolivia ternal deficits, the government attempted to regain Uruguay 5 Ethiopia1 S control by increasing restrictions and taxes on trade instead of changing the public expenditure and ex- 2 6 10 14 18 22 26 change rate policies which had caused the imbalance. Real exchange rate instability (percent) Source: Cavallo, Cottani, and Khan (background paper). 31 0.8 percentage points lower and an export growth adjust and resources are to be allocated and used that was 1.8 percentage points lower than would efficiently. Those developing countries that do not have prevailed without the increase in misalign- allow their exchange rates to change will be forced ment (see Figure 2.3). In high-growth economies to resort to other measures, such as trade barriers or such as Korea and Thailand, the real exchange rate foreign exchange controls, to avoid running down was far less out of line than in poor performers reserves. This will lead to wasted resources and such as Jamaica and Ghana, where misalignment efficiency losses. Indeed, a number of countries, (before recent reforms were undertaken) averaged particularly in Latin America, have recently im- 23 and 73 percent, respectively, for the period proved their exchange rate policies significantly. 1960-83. For the same group of countries, a 10 per- Nevertheless, although permitting the exchange cent average increase in the real exchange rate's rate to adjust is necessary to maintain the open- instability was found to be associated with a reduc- ness of an economy, it cannot substitute for adjust- tion of 4.8 percentage points in the net investment ment in other policies. If the cause of an unstable ratio (see Figure 2.4). macroeconomic situation is monetary or fiscal When the two measures are considered together, policy, that is where reforms must be made (see they explain more of the variation in the indicators Box 2.3). of economic performance. Misalignment seems to In addition to managing their exchange rates, be more important than instability in explaining many developing countries impose a complex ar- changes in GDP and export growth, while instabil- ray of taxes and quantitative controls on imports ity seems more important in explaining changes in and (to a lesser extent) exports. These trade policy investment. One would expect this. Exchange rate measures are directed at such goals as protecting overvaluation discourages export and GDP domestic industries, raising revenue, and shoring growth; investment decisions are affected mainly up international reserves. They create an unstable by uncertainty about relative prices. set of disparate incentives that cut across a broad The underlying message is simple: a flexible ex- range of domestic production activities and con- change rate policy is critical if the economy is to sumption goods. But within this variability is a ba- Table 2.10 Change in U.S. interest rates and the export prices of developing countries, 1978-85 If em 1978 1979 1980 1981 1982 1983 1984 1985 Six-month dollar LIBOR 9.5 12.1 14.3 16.6 13.3 9.9 11.2 8.7 Export price index (percentage change) Oil exporters 3.2 36.6 46.3 6.3 -4.4 -9.2 -1.0 -3.6 Oil importers 3.8 19.4 12.0 -2.1 -4.8 -1.0 -1.3 -1.6 U.S. GOP deflator (percentage change) 6.7 8.5 8.9 9.2 6.0 3.8 3.8 3.5 U.S. real interest rateb 2.6 3.3 5.0 6.8 6.9 5.9 7.4 5.2 Includes China. Defined as six-month dollar LIBOR deflated by the U.S. GDP deflator. Table 2.11 Debt indicators for developing countries, 1980-85 (percent) Indicator 1980 1981 1982 1983 1984 1985 Ratio of debt to GNP 21.1 22.8 26.8 31.8 32.7 33.0 Ratio of debt to exports 90.1 97.5 116.4 134.3 130.4 135.7 Debt service ratio 16.1 17.7 20.7 19.4 19.8 21.9 Ratio of debt service to GNP 3.8 4.1 4.7 4.6 5.0 5.3 Ratio of interest service to exports 7.0 8.3 10.4 10.0 10.5 11.0 Total debt outstanding and disbursed (billions of dollars) 431.6 492.5 552.4 629.9 674.1 711.2 Private debt as a percentage of total debt 63.3 64.5 64.9 66.1 65.7 64.5 Note: Data are based on a sample of ninety developing countries. 32 Table 2.12 New commitments to public and publicly guaranteed borrowers in developing countries 1978-84 (billions of dollars) Item 1978 1979 1980 1981 1982 1983 1984 All developing countries Total commitments 83.7 95.1 93.1 103.0 99.2 87.2 69.9 Private source 53.4 64.0 50.1 64.2 61.4 49.6 36.3 Official source 30.3 31.0 42.9 38.8 37.7 37.6 33.6 Bilateral 16.5 16.4 23.5 19.5 17.4 16.2 13.6 Multilateral 13.8 14.6 19.4 19.3 20.3 21.4 20.0 Low-income Africa Total commitments 3.8 4.5 5.2 3.7 3.6 3.1 3.0 Private source 1.1 1.6 1.5 0.8 0.5 0.2 0.4 Official source 2.8 2.9 3.8 2.9 3.1 2.9 2.6 Bilateral 1.6 1.4 1.9 1.2 1.4 1.4 0.9 Multilateral 1.2 1.5 1.9 1.7 1.7 1.5 1.7 Heavily indebted count ries Total commitments 50.8 62.2 54.6 79.0 61.7 41.8 29.9 Private source 42.4 54.4 44.7 65.9 49.2 28.7 20.1 Official source 8.4 7.8 9.9 13.1 12.5 13.1 9.7 Bilateral 3.6 2.5 4.5 5.9 5.0 4.7 3.5 Multilateral 4.8 5.3 5.4 7.2 7.5 8.4 6.2 a. Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Côte d'lvoire, Ecuador, Jamaica, Mexico, Morocco, Nigeria, Peru, Philippines, Uruguay, Venezuela, and Yugoslavia. These countries accounted for nearly half of all developing countries' debt at the end of 1985. sic pattern of encouraging manufacturing activities ing countries tried to offset the effects of external relative to agriculture and import substitution ac- shocks, higher inflation, and lower growth by bor- tivities relative to exports. rowing more, mostly at short-term maturities and There is a convincing body of quantitative evi- floating rates. The shift in favor of commercial dence from cross-country studies that developing bank lending at floating rates in the 1970s left de- countries with less distorted trade policy regimes veloping countries vulnerable to an increase in in- (particularly those that are less biased against ex- terest rates and to reductions in the volume of pri- ports) have fared better in terms of growth perfor- vate lending. The 1979 oil price increase and the mance,. coping with external shocks, and employ- recession of the early 1980s exposed these weak- ment creation. Recognition of this has encouraged nesses. some reappraisal of trade policies and led to cer- The monetary and fiscal policy mix pursued by tain reforms to promote efficiency and growth. industrial countries after 1979 drove interest rates The basic objectives are to simplify and unify trade up at the same time that the export prices for many incentives and, most important, to reduce the bi- developing countries declined. In 1982, oil- ases against agriculture and exports. The reforms importing developing countries were paying a generally involve a commitment to follow a more nominal rate of interest of around 13 percent for appropriate exchange rate policy and to implement commercial loans while their export prices de- an import liberalization program. Components of clined by 5 percent (see Table 2.10). These external such a program should include the removal of developments made the process of stabilization and quantitative restrictions on imports and lower, adjustment that much more difficult (see Box 2.4). more uniform tariffs and other charges on imports. As interest rates rose and developing countries continued to borrow, their creditworthiness indi- The international environment cators deteriorated. Between 1980 and 1982, the proportion of debt to GNP rose from 21.1 percent At the root of the poor performance and debt prob- to 26.8 percent; that of debt to exports rose from lems of developing countries lies their failure to 90.1 percent to 116.4 percent; and the debt service adjust to the external developments that have ratio (interest payments plus amortization as a per- taken place since the early 1970s, coupled with the centage of exports) increased from 16.1 percent to magnitude of the external shocks. Many develop- 20.7 percent (see Table 2.11). Although the ratio of 33 Box 2.4 Reacting to a debt crisis 'The international debt crisis" is a threadbare phrase, Box figure 2.4A Movements in the trade balance and but it does express the fact that although many differ- real exchange rate in Argentina, Chile, Mexico, and ent countries have experienced debt problems, their the Philippines, selected years, 1977-84 experiences have certain features in common. At the same time, differences in the ways countries have re- Billions of fourth quarter Real exchange rate index 1980 dollars (fourth quarter 1980 100) acted (or failed to react) to these problems suggest 2.0 Argentina 380 guidelines for policymakers in the future. A debt crisis usually has its origin in an unusually large inflow of 340 capital. This inflow adds to total spending and pushes 1.2 GDP beyond the level that would be achieved with 260 domestic resources alone. As capital flows in, the trade 0.6 account moves into deficit and the real exchange rate tends to appreciate. 0 180 The onset of a debt crisis occurs when these move- ments are sharply reversed. The reduced capital inflow 0.6 requires a corresponding improvement in the balance of trade, which is brought about in part through a 12 ti liii Iii I iii ii I 100 1977 1978 1979 1980 1981 1982 1983 1984 reduction in spending and in part through a real ex- change rate depreciation. 0.4 135 Box figure 2.4A shows how in four countries the real exchange rate fell during the period of capital inflow and increasing trade deficit and then rose as the trade balance improved in response to a debt crisis. Also, as 0 115 Box figure 2.4B shows, real GDP rose to a peak during the period of large capital inflows, then fell sharply as I the country adjusted to the reduction in these flows. 0.4 100 These oscillations partly reflect the direct impact of for- eign capital on GDP, but the decline in GDP is also associated with the tighter monetary and fiscal policies adopted in an attempt to improve the trade balance. 08 85 1979 1980 1981 1982 1983 1984 The triple pressure---from reduced capital flows, tighter macroeconomic policies, and a falling real ex- 5 150 change rateproduced a sharp decline in the volume 4 140 of imports in all four countries (see Box figure 2.4B). In the short term, imports tend to bear the brunt of the trade account's adjustment because exports respond 2 120 only with a lag. Different countries' exports responded differently in the wake of a debt crisis, the story here being compli- 0 100 cated by other factors such as weather cycles and world price movements of principal export commodi- ties. Thus, Argentina's export volumes rose by 10 per- cent in the first year of adjustment (1981), only to fall 2 80 1978 1979 1980 1981 1982 1983 1984 back to near their 1980 levels in the following two years. Chile's exports stayed roughly constant in vol- 0.1 124 ume terms, despite a substantial real devaluation, 120 mainly because of declining world copper prices. The exports of Mexico and the Philippines grew, but only 0.4 moderately, in the years following their debt crises 110 (1982 and 1983, respectively). One important difference among countries that faced a debt crisis is the way in which inflation impinged on 0.7 100 their adaptation to the crisis. Box table 2.4 summarizes the experience of eleven countries. It shows the maxi- mum real exchange rate devaluation achieved by each 1.0 90 1979 1980 1981 1982 1983 1984 country as it adjusted to the crisis (column 3). It also 34 shows the contemporaneous rise in the consumer price rise. The figures in column 5 can be taken as an index index (column 4). Since a devaluation of the nominal of how successfully different countries met this chal- exchange rate increases the internal prices of tradable lenge. Venezuela, the Philippines, Uruguay, and Chile goods, it is almost inevitable that a large devaluation were the most successful; Argentina, Bolivia, Peru, will entail a rise in the general price index. (Otherwise, and Brazil saw inflation increase more than might be a major fall in the prices of nontradable goods would expected from the extent of their real devaluations, be required.) The policy challenge is to limit this price Box table 2.4 Real devaluation and inflation in countries that faced a debt crisis Time periods being compared litflation (year and quarter) Rat io of relative Precrisis Postcrisis real exchange to real trough peak rate" Ratio of CPI5 devaluation' Country (1) (2) (3) (4) (5) Argentina 1980 IV 1984 1 2.57 53.34 20.75 Bolivia 1982 III 198411 1.59 18.83 11.85 Brazil 1982 III 1984 III 1.48 7.23 4.89 Chile 19821 1984 III 1.45 1.61 1.11 Mexico 1981 IV 1983 II! 1.50 3.13 2.08 Peru 19821 1984 I 11 1.11 5.86 5.28 Philippines 1982 III 1983 IV 1.36 1.19 0.87 Portugal 1979 III 1983 Ill 1.48 2.15 1.45 Turkey 1979 IV 1984 II 1.92 5.65 2.94 Uruguay 1982 III 1984 II 2.00 2.09 1.05 Venezuela 1983 II 198411 1.74 1.11 0.64 Measured from peak to trough. Consumer price index at peak divided by consumer price index at trough. Column (4) divided by column (5). Source: Harberger, "Reacting to a Debt Crisis" (background paper). Box figure 2.4B Changes in real GDP and real imports in Argentina, Chile, Mexico, and the Philippines, selected years, 1978-84 Real GDP index Argentina Chile Mexico Philippines 120 114 104 94 Real import index 220 r- 170 110 50 1978 1980 1982 1979 1981 1983 Note: The GDP index is calculated from International Financial Statistics data with the starting year equal to 100. The real import index is calculated by deflating nominal imports by an SDR-weighted index of wholesale prices of major industrial countries. The broken line indicates the onset of the debt crisis. Sos rc,': IMF International Financial Statistics, various years. 35 debt to exports improved slightly in 1984, all the ten with assistance of the International Monetary major creditworthiness indicators deteriorated Fund (IMF). Policies designed to reduce govern- again in 1985, primarily because the drop in export ment expenditure, increase taxes, realign the ex- earnings exceeded the benefits derived from lower change rate, and restrict credit were implemented interest rates. to move the economy toward internal and external The deteriorating creditworthiness of develop- balance in the near term. ing countries did not go unobserved by creditors. As a result, there was a sharp reduction in the By 1982 they had become reluctant to extend new overall current account deficit of developing coun- loans to public borrowers. Table 2.12 provides esti- tries, from the trough of $105.6 billion in 1981 to mates of new loan commitments to all developing $34.1 billion in 1984 and $40.6 billion by 1985 (see countries. It also splits out two of the most vulner- Table 2.13). Initially, this was achieved mainly by a able subgroups-low-income Africa and the most drastic reduction in imports. The adjustment of the heavily indebted developing countries. New com- external account followed partly from necessary mitments of capital from private sources to all de- adjustments in exchange rates and cuts in public veloping countries declined from a peak of $64.2 spending, but also partly from a more worrisome billion in 1981 to $36.3 billion by 1984. The onus of increase in import restrictions and tighter rationing most of the reduction fell on the most heavily in- of private sector credit. Toward the end of the pe- debted developing countries. For this subgroup riod, however, particularly in 1984, the increase in new private commitments fell by more than two- exports brought about by exchange rate adjust- thirds between 1981 and 1984. Official new com- ments and trade policy reforms made a significant mitments to all developing countries also declined contribution to reducing the external deficit. The during this period, from $38.8 billion to $33.6 bil- buoyant world economy in 1984 supported this ad- lion, principally because of reductions in bilateral justment effort. commitments. It should be noted, however, that But during 1985 a combination of adverse devel- the data in Table 2.12 understate the amount of opments in the world economy and, in some long-term lending actually made, because the table cases, inappropriate domestic policies hindered excludes new loans that are made when existing further progress. Even those economies that had obligations are rescheduled. made credible policy changes continued to face The heavily indebted middle- and low-income considerable problems in restoring growth. Be- developing countries became unable to service cause debtors needed to run trade surpluses to their debts normally. The causes and circum- service their debts, slower growth in industrial stances varied from country to country, as the con- countries and the larger relative decline in the trast between Brazil, Mexico, and Turkey demon- growth of world trade volumes in 1985 made it strates. But attempts to restore macroeconomic difficult to expand exports. Because export prices stability and growth had certain policy compo- also declined, many developing countries at- nents in common. Because an improvement in ex- tempted to adjust by contracting imports and do- port performance in response to policy changes mestic investment further. can take time, countries began addressing their se- The overall decline in developing countries' ex- vere external imbalances by focusing on reducing port prices is shown in Table 2.7. Since 1980, non- spending, particularly spending on imports. Many oil commodity prices have fallen by 26 percent in countries embarked on stabilization programs, of- dollar terms, or by 23 percent relative to the price Table 2.13 Current account balance in developing countries, 1980-85 (billions of dollars) Count ry group 1980 1981 1982 1983 1984 1985 Low-income countries -15.5 -12.5 -6.7 -4.3 -7.9 -22.0 Africa -5.8 -6.3 -5.5 -4.4 -4.6 -5.1 Asia -9.7 -6.2 -1.2 0.1 -3.3 -16.9 Middle-income oil exporters 1.5 -27.3 -35.8 -11.0 -1.9 -5.5 Middle-income oil importers -53.8 -65.8 -57.9 -37.1 -24.3 -13.0 All developing countries -67.8 -105.6 -100.4 -52.4 -34.1 -40.6 Note: Data for developing countries are based on a sample of ninety Countries. Data for 1984 and 1985 are provisional estimates. The current account balance excludes official transfers. 36 Table 2.14 Public and private long-term capital flows to developing countries, 1975 and 1980-85 (billions of dollars) Country group and item 1975 1980 1981 1982 1983 1984 1985 All developing countries Disbursements 46.4 102.6 121.9 115.5 95.3 86.8 92.9 From private creditors 31.4 75.3 91.4 84.2 64.8 54.3 55.5 Principal repayments 15.8 43.8 47.3 49.3 42.8 46.8 57.4 Net flows 30.6 58.9 74.6 66.2 52.5 40.0 35.5 Low-income Africa Disbursements 2.0 4.2 4.0 3.3 3.0 2.5 3.4 From private creditors 0.8 1.6 1.3 0.9 0.6 0.3 1.7 Principal repayments 0.4 0.8 0.8 0.9 0.8 1.0 2.0 Net flows 1.6 3.4 3.1 2.3 2.2 1.4 1.4 Heavily indebted count ries' Disbursements 21.3 53.1 69.0 57.6 38.3 32.5 31.9 From private creditors 17.3 45.9 60.5 48.3 28.8 22.6 18.5 Principal repayments 8.9 24.7 26.1 25.7 18.1 18.2 21.8 Net flows 12.4 28.4 42.9 31.8 20.2 14.3 10.1 Note: Data for 1984 and 1985 are provisional estimates of amounts paid, not amounts due. Private nonguaranteed debt has been estimated where not reported by a country. Official grants are excluded. Data are based on a sample of ninety developing countries. a. Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Côte d'lvoire, Ecuador. Jamaica, Mexico, Morocco, Nigeria, Peru, Philippines, Uruguay, Venezuela, and Yugoslavia. These countries accounted for nearly half of all developing countries' debt at the end of 1985. of manufactures. This fall can be attributed to 1985. Net flows to low-income Africa have been slower growth in demand from industrial coun- cut to less than half their 1981 level, dropping from tries, the strength of the dollar until early 1985, $3.1 billion to $1.4 billion. In the case of low- and high real interest rates that increased the cost income Africa, however, official grants remain of holding inventories. The fall in agricultural important-these increased slightly, from $3.2 bil- prices has been accentuated by large increases in lion in 1981 to $3.3 billion in 1984. the supply of agricultural raw materials, which In real terms, the drop in net capital flows was were triggered in part by price support measures even larger. In addition, total interest payments by and trade protection in industrial countries. The developing countries on external public and pri- fall in the price of metals has reflected worldwide vate long-term debt amounted to $57.6 billion in overcapacity and, in some cases (tin, for example), 1985 (up from $41.8 billion in 1981), which repre- the breakdown of previous agreement among pro- sented 11 percent of their export earnings. Thus, ducers to constrain supply and inventory levels. developing countries paid out approximately $22 But the decline in the price of primary commodi- billion more in long-term debt service in 1985 than ties relative to the price of manufactures also re- they received in disbursements of long-term lend- flects an underlying trend toward more efficient ing. The heavily indebted countries accounted for use of materials and increased substitution of syn- most of this net transfer. thetics. Cyclical fluctuations do, however, play an In response to the growing debt problems of de- important role; since 1980, with the exception of veloping countries, rescheduling agreements in- 1984, their effect has generally been unfavorable. creased markedly in both number and value in In addition, net long-term capital flows to devel- 1983 (see Figure 2.5). The dip in the value of re- oping countries have continued to decline since schedulings recorded in 1984 reflects the slippage 1981 (see Table 2.14). By 1985, net long-term in- of several agreements that were agreed to in prin- flows were approximately $35.5 billion, down 52 ciple in that year but not signed until 1985. As a percent from the $74.6 billion reached in 1981. For result, reschedulings reached a record value of $93 the group of heavily indebted countries, the de billion in 1985. The most prominent example was dine has been approximately 76 percent, from Mexico's $49 billion multiyear rescheduling agree- $42.9 billion in 1981 to an estimated $10.1 billion in ment (MYRA). Important agreements were also 37 Partly as a result of unavoidable stabilization Figure 2.5 Debt rescheduling, 1979-85 measures, real wages have declined at the same Billions of dollars time that interest payments on public debt have 100 increased. This has made it difficult for either indi- viduals or governments to increase gross domestic 12 savings. Since many countries have also had their 80 access to foreign savings curtailed, gross domestic investment has been reduced. This will retard re- covery over the medium term, even if policy changes create profitable investment opportuni- 60 ties. In addition, despite high interest payments, some governments have not reduced other items of public expenditure in line with declining na- 40 tional income. The resulting budget deficit has led to tighter credit rationing or higher real interest rates and thus has exacerbated the crowding out of 20 profitable private investment. It has also been ob- served that higher import tariffs have often been applied to raise tax revenue as well as to reduce the trade deficit. But this lowers the relative incentives 0 1979 1982 to export, thereby reducing the export growth re- 1980 1981 1983 1984 1985' quired to restore creditworthiness. In some cases 0 Paris ClubL 0 Commercial banks the distortions have been made worse by recourse Note: The figures above the bars indicate the number of resched- to additional export taxes as a quick and easy uling agreements. source of government revenue. Excludes $26.4 billion of renegotiated commercial debt agreed to in principle but not completed. The problems are particularly serious in low- Includes rescheduling in all official forums. income Africa. Export earnings have fallen at a Source: World Bank World Debt Tables, 1985-86 edition. time when private capital inflows and domestic savings have slumped. So, on top of the rapid population growth and inefficient use of invest- concluded for Argentina, Chile, Ecuador, and the ment that characterized much of low-income Af- Philippines. rica throughout the 1970s has been added an abso- Yet, the underlying pace of rescheduling agree- lute shortage of savings in the early 1980s. The ments with private creditors has slackened in com- resulting decline in productive investment is jeop- parison with 1983. Of the eleven reschedulings ardizing future growth. As the next chapter ar- that had been agreed to in principle in 1984 but not gues, special efforts are needed to reform institu- completed, only three were signed in 1985. It is tions and incentives in many African countries, clear that some major debtors still have a long way and these reforms must be supported by a coordi- to go in restoring their access to voluntary com- nated international effort to increase resource mercial lending. flows. The so-called debt overhang is restricting the ac- The debt overhang cess of many heavily indebted countries that are undertaking credible economic reforms to the re- Monetary and fiscal reforms, the reduction of dis- sources needed to increase investment and stimu- tortions to minimize efficiency losses, and appro- late growth. The recent fall in the price of oil, priate exchange rate policiesall these are parts of though it has helped oil importers, has worsened a necessary process of long-term adjustment for matters for those major debtorsIndonesia, Mex- developing countries. But the pressing short-run ico, Nigeria, and Venezuelathat depend heavily problems of some developing countries have led on crude oil exports. It lowers their immediate ex- them to undertake major adjustments quickly. In port earnings and weakens their ability to attract addition, some countries have adopted policies more commercial capital. that have produced often unnecessary conflicts be- Thus, many developing countries enter the sec- tween short-term stabilization and longer-term ond half of the 1980s confronted with the problem growth. of how to stabilize and restore growth within, 38 what is for some, an inhospitable world environ- cussed in this chapter. But, in any event, domestic ment. The lower interest rates and declining oil reform efforts will succeed more readily in an im- prices have undoubtedly helped many developing proved international environment. Sustained countries in 1985 and the first half of 1986. But the growthof the type experienced in the 1960scan slower growth in world trade, declining or stag- be achieved. But it will take a commitment to pol- nant export prices, increased trade barriers, and icy reform by both developing and industrial coun- reduced net capital inflows have overwhelmed tries and a reduction in international trade restric- these gains for many others. Those developing tions. The policies and international initiatives countries that have not attempted to stabilize their needed to attain adjustment with growth are the economies, or have faltered mid-course, will have subjects of Chapter 3. to press ahead with the types of policy reform dis- 39 Opportunities for growth As growth slows, governments turn their attention productively to sustain growth over the medium to reviving itand to addressing the problems that term. slower growth creates. Developing countries have taken many steps to improve their economic per- Policies for growth in developing countries formance and to adjust to the changing interna- tional economic environment. But as they look A useful way to approach this issue is to consider ahead to the rest of this decade and beyond, they the distinction between stabilization policies and recognize that there is room for further improve- structural adjustment policies. Stabilization poli- ment. Better policies are especially needed because cies include the monetary, fiscal, exchange rate, the international environment is fraught with un- and incomes policies that governments use to certainty. Commodity prices are depressed, real maintain macroeconomic balance. Structural ad- interest rates are still above historical levels, and justment policies concern those things which influ- the debt service burden imposes serious con- ence production, trade, and distribution decisions: straints on many countries' long-term prospects changes in incentives, government institutions, for growth. and the rules governing property rights, liability, As the economies of the world become increas- and information. Obviously, the two sets of poli- ingly interdependent, future prospects for the cies overlap and can complement each other. An world economy depend upon the policies that exchange rate adjustment not only stabilizes the both the industrial and developing countries current account but also will increase the share of adopt. This chapter describes two possible paths exports in domestic output. Similarly, restruc- for the world economy during the next ten years turing a public enterprise may improve its effi- and the policies that might bring them about. Both ciency and also reduce the public sector deficit. High and Low cases presuppose the same moder- Sometimes the two policies work against each ate improvements in the economic policies of de- other. A rapid reduction in distortionary trade veloping countries. However, if the pace of reform taxes can, if there are no new revenue-raising mea- were to quicken, or if more countries were to im- sures, increase the budget deficit in the short run. plement corrective policies, the average growth Unless macroeconomic policy is consistent with rates for developing countries would exceed our longer-term structural aims, governments run the estimates in each case. As the recent success of risk of having to reverse or abandon policy reforms countries as diverse as Turkey and China illus- for the wrong reasons. The Philippines is a case in trates, it is the developing countries' own policies point (see Box 2.3 in Chapter 2). that determine how much they can take advantage While the exact mix of appropriate policies varies of, or offset, changes in the world economy. from country to country, the overall aim is to re- Developing countries cannot assume a stable or store and maintain economic stability while simul- favorable external environment. It is, therefore, taneously improving the incentive and institu- important to outline the kinds of policy which tional structure to encourage domestic savings and would improve their ability to adapt to unpredict- the efficient allocation of resources. Whether the able circumstances and to use capital flows most initial problems are caused by unsustainable do- 40 mestic policies (for example, a large fiscal deficit), 1970s the government pursued expansionary mon- sudden changes in the external environment (such etary and fiscal policies, financed the current ac- as a drop in the price of oil), or a combination of count deficits with heavy foreign borrowing, and both, the sooner the economy can be stabilized, protected domestic industry with high import bar- taking due account of adjustment costs, the greater riers. When it could no longer borrow abroad, the its ability to deal with subsequent shocks. If bud- government implemented a comprehensive policy get deficits or external imbalances are allowed to package designed to both restore domestic stability continue unchecked, the country will be forced to and restructure the economy over the medium run down its foreign exchange reserves and ex- term. Exchange rate adjustment accompanied by haust its access to foreign borrowing. Once this tighter monetary and fiscal policies restored stabil- happens, domestic demand can no longer be ity. This created the conditions needed to support maintained above income. Given such a situation, the structural adjustment policies, the objectives of governments have only two options: to address which were to open up the economy, increase eff i- the fundamental policy issues or to further con- ciency, and stimulate growth. As a result, between strain growth. And they must do something with- 1980 and 1984, Turkey increased the dollar value of out delay. The flexibility provided by access to for- its merchandise exports by 120 percent at a time eign borrowing will have been lost because of past when world non-oil exports rose by only about 5 policy errors. percent. The average annual real GDP growth in- An example is provided by those countries in creased to 4.6 percent during this period. sub-Saharan Africa and elsewhere that failed to This example illustrates the point that stabiliza- adjust spending after the commodity price boom tion is not an end in itself. Rather, stabilization in the mid-1970s. They continued to maintain ex- policies should be thought of as facilitating mea- change rates and spending (especially public in- sures in the transition toward a new framework vestment) at levels which were sustainable only if which permits a higher, but sustainable, rate of export prices quickly returned to previous peak economic growth. Once domestic stability is re- levels. But commodity prices did not rise, and, stored, growth needs to be stimulated by policies moreover, these countries soon had to cope with that encourage increased savings and investment, the second oil shock, high real interest rates, and a greater efficiency, and higher productivity. worldwide recession. This would have been a bur- Structural adjustment policies focus on changing den under any circumstances, but many countries institutions and incentives. The main objectives had already exhausted their access to short-term should be (a) to mobilize resources by raising the capital and depleted their foreign exchange re- domestic savings rate, attracting foreign capital, serves. and, if necessary, reversing capital flight; (b) to al- Other countries have demonstrated the longer- locate resources more efficiently and raise the pro- term benefits of implementing policies which ductivity of the existing capital stock; and (c) to quickly restore macroeconomic stability. Indonesia create employment and income in areas where the faced the prospect of sharply declining income in economy has a comparative advantage. the early 1980s. Oil prices began to weaken, world growth slowed, and capital flight began to put Domestic savings pressure on the current account. The government quickly cut subsidies to oil consumers, canceled or If investment is to be restored to the level required postponed nearly fifty import-intensive invest- to sustain growth while debt obligations are met, ment projects, devalued the currency, and shifted many developing countries will have to increase to a managed float. Zero real GDP growth in 1982 domestic savings. Ultimately, an increase in do- was followed by a 3.3 percent growth rate in 1983 mestic savings depends on the government's com- and growth rates of 6.6 percent in 1984 and 1985. mitment to adopt the policies needed to establish a The current account deficit as a proportion of GDP stable macroeconomic environment. Reduced bud- declined from 8.5 percent in 1982 to 2.5 percent in get deficits, an appropriate rate of monetary 1984. growth, and stable real exchange rates will do Turkey provides an example of a country where much to stimulate savings. Such policies would domestic policies, as opposed to a sudden change also deter and, it is hoped, reverse the transfer of in external circumstances, created an unsustain- domestic savings abroad. Capital flight has be- able macroeconomic position that slowed growth come endemic in many economies with inappro- until corrective action was taken. Throughout the priate exchange and interest rates. A reversal of 41 this process will provide a clear and important sig- increased penalties for evasionand broaden the nal to foreign investors and commercial banks that tax base. the nationals within a country have had their con- Private savings could also be encouraged by tax fidence in the economy restored by credible gov- reform. By limiting the taxation of interest pay- ernment policies. ments to inflation-adjusted receipts and by reduc- With respect to public savings, governments ing marginal tax rates, personal savings can be in- have two fundamental options: they can either re- creased. This should be supported by the removal duce expenditures or raise revenues. Many devel- of distortions in credit markets, particularly oping countries could reduce public spending through proper interest rate policies on deposits. without slowing economic growth or adversely af- A recent World Bank review of financial sector pol- fecting the poor. This would entail such measures icies in Bangladesh, Kenya, Nigeria, Peru, Thai- as reducing military spending, improving public land, Turkey, and Uruguay suggested that in many sector wage and pricing policies, reducing and re- cases the elimination of government control of in- allocating current expenditures, and improving terest rates and bank fees and increased competi- the efficiency of the public sector. For example, tion among financial institutions would improve many developing countries would benefit if they financial intermediation and increase private finan- increased public utility (electricity, water, gas) and cial savings. These measures would also limit the transport charges to reflect the long-term opportu- outflow of capital. But, to return to our opening nity costs and rationalized their agricultural sup- point, the restoration of private sector confidence port programs. A higher level of efficiency in the is crucial to raising domestic savings rates. public sector could be attained by management and institutional reforms designed to improve the planning and budgeting process and to strengthen The level and efficiency of investment the degree of public sector accountability. An important potential source of public sector The method by which many developing countries savings is reduced expenditures on loss-making adjusted to the changing external environment of and inefficient public enterprises. For example, in the early 1980s led to a considerable fall in domes- Argentina the 353 state-owned enterprises lose an tic investment. Policies designed to reverse this estimated $2 billion annually and hold about $11 trend and, more important, to increase the effi- billion of the country's $46 billion foreign debt. cient allocation and utilization of investment are Many countries in sub-Saharan Africa could also necessary to sustain growth over the medium gain by eliminating the deficits associated with term. parastatals; they should close down the worst and With respect to public investment, those cuts introduce reforms to increase the efficiency and ac- that have scaled down or eliminated low-return countability of the remainder. There is also consid- projects (such as the Majes irrigation scheme in erable scope for rationalizing the public sector Peru or the extension of the metro systems in Chile through divestiture. This would provide a one- and Colombia) have clearly been beneficial to the time increase in public savings and improve re- economies involved. Before the 1980s, the quality source allocation over the medium term. of public investments in many developing coun- Governments can also raise public savings by tries was at best mixed. Some governments, how- increased taxation (including the inflation tax). In- ever, are unable or unwilling to make selective creased taxation, where unavoidable, needs to he cuts. Public investment programs have often been formulated in such a way as to minimize the effi- reduced by damaging across-the-board cuts. There ciency losses and tax evasion effects discussed ear- would, therefore, be considerable efficiency gains lier. Furthermore, the decline in per capita con- from creating the institutional capability to system- sumption levels in many Latin American and atically evaluate projects at the planning stage and African countries means that the positive effect to allocate adequate resources toward maintenance that an increase in taxation may have on the bud- and rehabilitation after the projects are completed. get deficit must be weighed against the negative Adjustment to a lower level of (more efficient) effect it will have on real income levels. There is, public investment could also be achieved by hav- however, scope for raising revenues by reforming ing government draw a clearer distinction between and improving the tax administration. This in- what is, and what is not, appropriate for public cludes measures designed to simplify the tax sector involvement. Many developing countries systemwith fewer exemptions or allowances and stand to gain from reducing and preventing fur- 42 ther public sector investment in activities where sate for a somnolent private sectorand much of the private sector has a comparative advantage (for that public investment is misallocated because of example, production and marketing activities in the distorted incentive system. Finally, the more industry, energy, and agriculture). Public invest- efficient investment in outward-oriented econo- ment should be directed toward activities with ex- mies encourages domestic savings, with foreign ternalities and long payback periods (for example, borrowing or direct investment playing a comple- human resource development and physical infra- mentary role. In inward-looking economies, for- structure). eign borrowing often acts as a substitute for do- Governments can contribute further to increas- mestic savings. ing the efficiency of investmentand to reducing For example, Korea, Thailand, and, more re- unemployment and alleviating povertyby creat- cently, Turkey have countered adverse external ing a policy environment which will encourage for- shocks primarily by undertaking domestic policy eign and domestic private investment. For private reforms. By allowing their exchange rates to ad- investment to be efficient, governments need to just, controlling public expenditures, and adopting provide a set of clear and nondiscriminatory poli- export promotion measures, they boosted exports, cies over an extended time period. This would in- reduced the need for foreign borrowing, and clude many of the policies discussed earlier: trade dampened inflation. In contrast, countries as di- policy reform, reduced administrative controls, a verse as Argentina, Jamaica, Mexico, and Tanzania less distortionary tax system, removal of distor- have attempted to finance their increased current tions in labor and capital markets, changes and account deficits with more foreign borrowing or clarification of foreign investment codes, and so increased aid. This enabled them to maintain exist- forth. Furthermore, in many heavily indebted ing exchange rates, which discouraged import sub- countries, such as Argentina, Brazil, Chile, and stitution and exports, which, in turn, increased Mexico, a major disincentive to new private invest- their dependence on foreign borrowing. When the ment has been the record level of real interest rates accumulation of debt denied them access to new in recent years. These high rates reflect both infla- funds, they were forced to deflate in order to lower tionary expectations and the pressure exerted on real incomes and import demand. credit markets by the need to finance large budget The adoption of policies designed to stabilize deficits and preferential credit programs for sectors and restructure the economy will stimulate such as agriculture. Breaking inflationary expecta- growth, even in an adverse world environment. tions and reducing government borrowing will But for the most heavily indebted developing contribute greatly to a lowering of real interest countries, the debt overhang is so constraining rates and will thereby stimulate private invest- that corrective domestic policies alone will not pro- ment. The recent monetary and fiscal reforms vide a viable solution to their problems. The do- adopted in Argentina and Brazil represent serious mestic adjustment effort will have to be supported attempts to tackle this problem. by additional capital inflows and growing export markets. For these countries, as discussed later, future trends in the external environment have the Policies to stimulate exports potential to undermine domestic adjustment ef- forts. There is a strong link between an economy's inter- These trends are illustrated in our High case and national trade and exchange rate regime and the Low case scenarios. The future stability and flexibility required to maintain growth. A competi- growth of the world economy depend on the eco- tive exchange rate and a fairly neutral trade and tax nomic policies adopted by both industrial and de- system tend to limit excessive foreign borrowing veloping countriesespecially policies related to and encourage exports and efficient import substi- international tradeand on the behavior of world tution. Countries which sell on world markets can capital markets which interact with these policies. exploit economies of specialization, size, and scale. The two scenarios provide illustrations of a consis- This helps to create efficient producers who are tent set of outcomes for a range of possible poli- competitive both at home and abroad. In inward- cies. They are not intended as forecasts and do not oriented economies, producers are limited to sell- allow for any exogenous shocks to the world econ- ing their goods in small, highly protected domestic omy, such as major disruptions in commodity or markets. The level of public investment in inward- capital markets. They show what is achievable, oriented economies tends to be higher to compen- rather than what is likely to be achieved. 43 A decade of opportunity, 1985-95 employment, which would ease social tensions and help reduce barriers to trade. The end result Policies in developing countries are expected to would be accelerated growth. improve moderately, along the lines discussed in Under these circumstances, growth in industrial the previous section, in both scenarios. Even with countries would increase to an average of about 4.3 these improvements, however, the Low case sce- percent a year. This is more than the average for nario will pose serious problems for many coun- 1973-80, but is below the rapid annual growth of tries. But without policy improvements, the situa- 4.7 percent between 1965 and 1973. Industrial tion of some developing countries is likely to be countries, particularly those in Europe, would en- untenable under any scenario. joy lower unemployment than has prevailed in the The recent declines in oil prices and real interest past five years, and inflation would remain at a rates could provide a useful stimulus to most de- moderate rate. If the United States and other in- veloping countries in the second half of the 1980s. dustrial countries with large public deficits were to Both our High and Low cases reflect the beneficial gradually eliminate the structural part of their bud- effects that these developments, if sustained for get deficits, the world's demand for credit would three to five years, would have on inflation and fall and nominal interest rates would decline to an growth. For many oil exporters, however, the average of about 5.6 percent. Real interest rates lower oil price presents severe difficulties. How would then return to around 2.6 percent, their his- successful governments are in building upon this toric average. stimulus, or in coping with their problems, will be Under these conditions most developing coun- determined by the policies they adopt. tries would find it easier to service their debts The favorable results illustrated in the High case through more rapid export growth and lower rates are based on the assumption that there would be a of interest. Annual rates of real GDP growth in steady reduction in the fraction of world credit ab- developing countries would increase to 5.9 per- sorbed by government deficits in industrial coun- cent, or 3.9 percent in per capita terms. Further- tries. This would lead to a higher rate of growth of more, the international debt burden would be investment in productive assets. Increased capital lightened by increased export earnings, a revival in stock would, in turn, lead to higher output and commercial bank lending, and higher direct invest- Table 3.1 Average performance of industrial and developing countries, 1965-95 (average annual percentage change) 1985-95 Count ry group 1965-73 1973 -80 1980-85 High Low Industrial countries GDP growth 4.7 2.8 2.2 4.3 2.5 Inflation rate' 5.1 8.3 -0.3 4.8 7.0 Real interest rate 2.5 0.7 6.7 2.6 4.5 Nominal lending rater 5.8 8.4 12.0 5.6 . 10.2 Developing countries GDP growth 6.6 5.4 3.3 5.9 4.0 Low-income countries Africa 3.9 2.7 0.9 4.0 3.2 Asia 5.9 5.0 7.8 6.4 4.4 Middle-income oil exporters 7.1 5.8 1.4 4.8 3.4 Middle-income oil importers Major exporters of manufactures 7.6 5.9 2.1 6.4 4.0 Other oil-importing countries 5.4 4.5 1.7 5.5 3.8 Export growth 5.0 4.6 4.1 7.1 3.2 Manufactures 11.6 13.8 7.9 9.8 5.0 Primary goods 3.8 1.1 1.4 4.3 1.5 Import growth 5.8 5.9 0.9 7.7 3.4 Note: Projected growth rates are based on a sample of ninety developing countries. Industrial countries' weighted GDP deflator expressed in U.S. dollars. Inflation in the United States is 3.0 percent per year in the High case and 5.7 percent in the Low case. But for the industrial countries as a whole, it is higher in dollars because of an assumed depreciation of the dollar between 1985 and 1990. Average for six-month U.S. dollar Eurocurrency rates deflated by the rate of change in the CDI' deflator of the United States. Average annual rate. 44 Table 3.2 Growth of GDP per capita, 1965-95 (average annual percentage change) 1985-95 Country group 1965-73 1973-80 1980-85 High Low Industrial countries 3.7 2.1 1.7 3.8 2.0 Developing countries 4.0 3.2 1.3 3.9 2.0 Low-income countries 3.0 2.7 5.2 4.4 2.5 Africa 1.2 -0.1 -2.0 0.8 0.0 Asia 3.2 3.0 5.9 4.8 2.8 Middle-income oil exporters 4.5 3.1 -1.1 2.3 0.9 Middle-income oil importers 4.5 3.2 -0.1 4.1 1.9 Major exporters of manufactures 5.2 3.7 0.2 4.6 2.2 Other oil-importing countries 2.8 2.1 -0.8 3.1 1.4 Note: Projected growth rates are based on a sample of ninety developing countries. ment in developing countries. This favorable over- precariously low 2.0 percent a year. all result conceals some variability, however. Even Under these circumstances some of the more in the High case, a number of sub-Saharan African outward-oriented middle-income exporters of countries and some heavily indebted oil exporters manufactures could sustain growth, albeit at com- would find it very difficult to adjust and grow. If paratively low rates. But for others the Low case they are to share in an expanding world economy, would mean another decade of low or negative additional measures-over and above those under- growth. Middle-income oil exporters would be un- lying our High case-would have to be taken. likely to achieve any significant increase in real in- The Low case illustrates what would happen if come, and the low-income African countries industrial countries were to abandon the tentative would suffer another decade of stagnation (see Ta- policy reforms adopted in the early 1980s. It re- ble 3.2). flects unchecked budget deficits, particularly in the In the Low case, even those countries that imple- United States. Even if lax fiscal policy were com- ment domestic reforms may find it difficult to earn bined initially with restrictive monetary policies, it or borrow the resources required for growth. The is likely that, under the cumulative pressure of consequences of slow industrial-country growth debts and deficits, monetary discipline would be and limited additional financing for heavily in- relaxed. This would lead to increasing real interest debted middle-income countries would be severe. rates because financial markets, expecting that the Following five years of stagnation and declining deficits would sooner or later be monetized, would per capita incomes, these countries would face the demand an inflation premium. These high rates hard choice of how much of their resources to would tend to reduce commercial bank lending to channel to service existing debt and how much to developing countries. At the same time, growing allocate to current consumption and investment. It trade account deficits in industrial countries would is impossible even to sketch the consequences of exacerbate the demands for increased protection, such choices. Here, only the tensions, not the out- which would, in turn, lead to reduced demand for comes, can be illustrated. developing-country exports and to lower com- modity prices. Policy requirements for the High case The consequences for industrial countries would be growth rates similar to, or even less than, those Assuming that moderate policy reforms continue of the uncertain 1970s. Annual GDP growth would in developing countries, the High case also re- average 2.5 percent between 1985 and 1995. Real quires improved performance in industrial coun- interest rates would remain high-around 4.5 tries. That, in turn, depends upon: percent-and inflation would rise to around 5-7 Monetary and fiscal policy. Continued large bud- percent. get deficits in the major industrial countries would The consequences for developing countries make it very difficult to sustain a higher rate of would range from awkward to grim. For develop- growth in the world economy. Higher real rates of ing countries as a whole, average annual GDP interest would eventually be accompanied by an growth rates would be 4.0 percent in the years to accelerating rate of inflation and increased protec- 1995 (see Table 3.1). Per capita growth would be a tion. The resulting stop-go policy mix that would 45 be adopted by governments as they attempted to needs to be reinforced by lowering targets for control inflation, unemployment, or the trade defi- monetary growth to cut inflation and reduce long- cit would slow world growth to the disappointing term nominal interest rates. Such an adjustment in rate obtained in the 1970s. Therefore, a primary the aggregate deficits of industrial countries could policy requirement of the High case is that those be achieved in a less disruptive manner if the larg- economies with persistently large deficits reduce est economies coordinate their macroeconomic them. As argued in Chapter 2, this should be policies. The recent success in reducing interest achieved primarily by cutting public expenditures. rates and the value of the dollar illustrates the po- Where tax increases are unavoidable, care needs to tential usefulness of such cooperation. be taken to minimize the distortionary effects and Labor markets. Chapter 2 argued that rigid and efficiency losses created by high marginal taxes. high real wages contribute to increases in unem- This combination of monetary and fiscal policies ployment. To create jobs, therefore, policies to en- Box 3.1 Multilateral trade negotiations and the GATT Throughout the post-World War II era, multilateral and the reduction of the distortions that bias produc- trade negotiations under the aegis of the GATT have tion against exports. The reciprocal and multilateral proved effective in stemming the tide of protectionism nature of the negotiations implies that developing and in achieving broad-scale reductions in tariff barri- countries have an opportunity to obtain greater access ers to trade. Partly as a consequence of the limited to markets in industrial countries in exchange for their participation of developing countries, reductions in own liberalization efforts. Strengthening of the GATT tariff barriers have been less substantial on their ex- system could also serve the developing countries' own ports. Developing countries have, however, benefited trading interests, especially if the result is a reduction from the extension to them, on a "most favored na- of the arbitrary and discriminatory protection practices tion" basis, of tariff reductions negotiated among in- of industrial countries against their exports. dustrial countries. Issues of access to markets in industrial countries are In the past several years, protectionism in industrial critical to the success of multilateral negotiations from countries on average has intensified, and nontariff bar- the standpoint of developing countries. Such issues riers to trade (as opposed to tariffs) have proliferated in arise with respect to both manufacturing and agricul- markets that are of present or potential interest to de- tural products. In the case of agricultural products, the veloping countriessuch as textiles and clothing, key issues are nontariff barriers and the subsidization steel, and agricultural products. Nontariff barriers to by many industrial countries of temperate-zone agri- trade across a wide range of product categories have cultural products. also continued to play a significant role in the trade The developing countries will not be able to reap regimes of developing countries. significant benefits unless they participate actively in Following extensive discussions in the past two these multilateral negotiations. Active participation years, the GATT is now preparing for a new round of implies a willingness to offer some reciprocal conces- multilateral negotiations. A preparatory committee is sions to industrial countries in the form of rationaliza- expected to produce a report on the substance and tion and liberalization of their own regimes. Certain modalities of the new round in July 1986. To produce import controls which developing countries often meaningful results, this round should focus on non- maintain create problems for export interests in the tariff barriers more than it has in the past, because they industrial countries, and the support of these export are the most important impediments to trade today. interests may well be critical to the industrial countries' The new round should also promote institutional re- ability to reduce import barriers on products of interest forms in the GATT that would strengthen the interna- to the developing countries. tional trading system and help prevent the growth of If the more developed of the developing countries protectionism. An important unresolved issue on are unwilling to provide reciprocal reductions in trade which views differ is whether trade in services should barriers as part of the negotiations, they face another be included in the negotiationsand if so, in what danger: industrial countries interested in pursuing manner. trade liberalization through multilateral negotiations The developing countries have an important stake in especially the United Stateswill engage in negotia- these negotiations. Liberalization and rationalization tions that exclude the developing countries. Such an of their own trade regimes are likely to bring them outcome would be detrimental both to developing important economic gains through increased efficiency countries and to the international trading system: 46 courage flexibility and reduce marginal labor costs often gone the other way: toward protectionism. are needed. This means encouraging training and By adopting the type of policies discussed above mobility, lowering unemployment insurance and (in particular, lower fiscal deficits), the industrial welfare benefits, and keeping wage settlements in countries could create the conditions for strong line with productivity increases. It also entails re- sustained growth. This would increase import de- ducing the protection afforded certain industries, mand among industrial countries and boost both so as to encourage the movement of labor into exports and imports of developing countries. It more efficient and competitive activities. would also create the conditions needed to reduce Trade liberalization. While governments in in- international trade restrictions. That would, in dustrial countries have started to correct some of turn, increase the volume of world trade over and the distortions caused by fiscal and monetary poli- above that resulting directly from higher growth. cies and labor rigidities, their trade policies have A new round of trade liberalization for manufac- trade barriers would tend to be reduced primarily on quire several years to complete, but the trade liberali- items of interest to industrial countries, and, at the zation agreed to is normally implemented in stages in same time, the multilateral nature of the trade system subsequent years. As a result, significant trade liberali- would be undermined by the spread of bilateral ar- zation from a new multilateral round cannot he ex- rangements. pected to take place before the end of this decade. The degree of reciprocity in negotiations should take However, many developing countries, especially the into account the varying stages of economic develop- heavily indebted ones, need to increase their export ment. The enabling clause of the GATT states that earnings within a much shorter time span. Increasing there is the "expectation of the developing countries their exports requires the reduction of the disincen- that they will be able to participate more fully in the tives to efficient exports created by their own highly framework of rights and obligations under the GATT protectionist trade regimes and improved access to with the progressive development of their economies markets in the industrial countries. Every encourage- and improvement in their trade situation." In keeping ment should be given to both industrial and develop- with this principle, those developing countries that ing countries so that they undertake the needed trade have already made significant strides in economic de- rationalization and liberalization now. velopment and that offer promise of further growth in The current preparations for a multilateral trade ne- the future may be expected to shoulder increasing obli- gotiation may, however, prompt many countries to gations in a new round of multilateral negotiations. consider delaying trade liberalization in order to pre- While many institutional changes may be desirable, serve their bargaining power for the multilateral nego- perhaps the most important is the establishment of an tiations. It would be truly unfortunate if the negotia- effective system of safeguards. Such a system is tion process undermined the prospects for critical needed to ensure that the reductions in protection that structural change as a result of the adoption of such a the negotiations secure are not arbitrarily and unilater- negotiation strategy. ally reversed and that temporary protection is pro- One possible way to address thisissue could be the vided for specific industries that need it. Thus, to pro- provision, within the framework of the multilateral ne- mote longer-term adjustment, a safeguard system gotiations, of appropriate "credit" for the adoption of should be uniform, temporary, and reduced progres- such prior reforms by developing countries. There are sively over time. precedents for credit being extended in negotiations The effective application of a safeguard system between industrial and developing countries during would also require strengthening the system for settle- the earlier Kennedy Round. Industrial countries might ment of trade disputes in the framework of the GATT. wish to agree in principle at the beginning of the nego- Institutional strengthening of the GATT would be tiations that credit would be given for liberalization or helpful to developing countries insofar as it is they, as other trade reforms undertaken by developing coun- the weaker trading partners, that have the most to gain tries after a certain date. Such an action may encourage from the greater adherence of nations to rules govern- developing countries to liberalize their trade regimes ing international trade. when it appears desirable to effect the structural trans- The process of trade liberalization through multila- formation they want rather than to wait until the teral negotiations has been, and is likely to remain, round has been completed. slow. Not only do the actual negotiations typically re- 47 tures and agricultural imports of industrial nations newly industrialized countries into the world would be needed for the growth rates of the High economy. Changes in export markets and interest case to be achieved. In addition, by 1995 the tariff rates would cause the performance of these econo- equivalents of major nontariff barriers would have mies to fluctuate more than that of the more to be significantly lower than they were in 1984 inward-looking and agriculture-based African (see Box 3.1). economies. But this does not mean that the newly industrialized countries are worse off. Indeed, Developing-country prospects their Low case growth rate exceeds the High case growth rate for low-income Africa. Developing The 5.9 percent growth rate of GDP in the High countries that attempt to insulate themselves from case illustrates how fast developing countries can the world economy may reduce the impact of in- grow, given continued domestic reforms and a fa- ternational cycles, but they pay the high price of vorable external environment. It implies a healthy lower growth rates under any world scenario. 3.9 percent growth rate in per capita income. In The higher per capita growth rate in low-income contrast, per capita income would grow at only 2.0 Asia is also due to the lower rate of population percent in the Low case. growth as compared with the rate in Africa. This As both High and Low cases presuppose similar reflects the relative success, particularly in China, improvements in developing-country policies, the that low-income Asia has had with population difference between the two cases for a particular control programs. group of countries provides a rough estimate of the extent to which changes in the world economy The High case affect the performance of that group. In low- income Asia, the growth rate in per capita income If OECD growth is strong, low-income Asia and shown in the High case is a strong 4.8 percent; in major exporters of manufactures would attain the the Low case the rate is 2.8 percent. For the major highest growth rate. Both groups would expand exporters of manufactures, the High case leads to a their exports of goods by more than 8.0 percent a per capita growth rate of 4.6 percent and the Low year (see Table 3.3). Much of the growth in per case only 2.2 percent. But in low-income African capita income levels in low-income Asia reflects countries, the corresponding rate is 0.8 percent in the performance of China and India. Their strong the High case, and in the Low case per capita in- performance results from continued domestic p01- comes would not increase at all. icy reforms and an increased level of foreign bor- The large differences between the High and Low rowing. The further opening up of these two im- cases for low-income Asia and for middle-income portant economies to international trade would major exporters of manufactures (2.0 and 2.4 per- lead to increased efficiency in domestic production centage points, respectively), as compared with and a higher rate of export growth. This, coupled the narrow gap for low-income Africa (0.8 percent- with a greater reliance on international capital mar- age point), reflect the greater integration of the kets (debt indicators for this country group in- Table 3.3 Change in trade in developing countries, 1965-95 (average annual percentage change) Exports of goods Exports of manufactures 1985-95 1985-95 Country group 1965-73 1973 -80 1980-85 High Low 1965-73 1973 -80 1980-85 High Low Developing countries 5.0 4.6 4.1 7.1 3.2 11.6 13.8 7.9 9.8 5.0 Low-income countries 1.9 5.4 5.0 8.0 4.3 2.3 8.3 7.4 11.1 6.5 Africa 4.6 1.3 -1.5 5.3 2.6 5.4 2.0 -2.1 9.3 4.6 Asia 0.6 6.8 6.6 8.4 4.6 2.0 8.7 7.8 11.1 6.5 Middle-income oil exporters 4.3 0.0 1.2 5.1 1.5 10.7 8.0 15.4 11.5 5.9 Middle-income oil importers 7.1 9.0 5.6 7.8 3.8 15.5 15.3 7.4 9.4 4.7 Major exporters of manufactures 9.2 10.6 5.9 8.1 3.9 15.6 15.9 7.0 9.3 4.6 Other oil-importing countries 2.4 3.5 4.3 6.6 3.4 14.8 9.1 13.0 10.6 6.5 Note: Historical growth rates of volume of international trade reflect revisions in the nominal trade figures, as well as revisions in the methodology of calculating trade deflators. 48 crease), supports the stronger growth shown in longer term, the oil price can be expected to our High case. strengthen as the faster growth in the world de- For major exporters of manufactures, such as mand for oil begins to press against existing sup- Korea and Brazil, stronger growth in industrial ply capacity. As a consequence, in a stronger countries plus the accompanying reduction in pro- world economy oil exporters could regain an an- tection would provide the growing markets they nual per capita growth rate of 2.3 percent over the need to expand production and exports. Export decade 1985-95 (see Box 3.2). growth, plus an increase in private capital inflows Middle-income countries that are not major ex- from abroad, would raise their capacity to import porters of manufactures could also attain a signifi- by close to 9 percent a year. As a result, these econ- cant improvement in their export growth, to 6.6 omies could sustain a faster rate of growth over the percent a year. However, as this larger group of next ten-year period. countries depends more on commodity exports, Even if our High case growth rates are achieved, the boost from higher world demand would be less the prospects for middle- and high-income oil ex- relative to that for exporters of manufactures. De- porters will be lower than they were last year. For mand for primary commodities is comparatively middle-income oil exporters (for example, Egypt, income inelastic-that is, does not rise proportion- Indonesia, and Malaysia), the recent drop in the ately to people's income-and substitutes are be- price of oil has led commercial banks to lower their coming increasingly competitive. Nevertheless, assessment of how much debt they can carry. For strong OECD growth would provide those middle- those oil exporters that have had debt-servicing income economies undertaking reforms (such as difficulties (for example, Mexico and Nigeria), the Côte d'Ivoire, Mauritius, Morocco, and Senegal) oil price decline exacerbates an already difficult sit- with the growing world markets they require to uation. As a consequence, significant steps need to realize the largest growth gains from their reforms. be taken to moderate the decline in their real in- Foreign exchange earnings would increase, and, comes. Of primary importance will be policy mea- given access to adequate foreign capital, these sures designed to increase domestic savings and to countries would be able to increase imports as well allocate and utilize resources more efficiently. A as service their debt (see "Capital flows and debt" reduction of the disincentives to new export activi- below). ties will be particularly important, as will the re- In low-income Africa, the negative per capita in- duction of trade barriers in industrial economies. come growth rates of the recent past would be re- As argued later, for the heavily indebted middle- versed in the High case. Low-income African income oil-exporting countries, this domestic ad- countries would gain significantly from the lower justment effort needs to be be supported by con- oil price. But if the world economy were to grow at tinued and increased access to external capital the rates indicated by our High case, they would flows. Under these conditions, middle-income oil also gain from the assumed reduced protection of exporters as a group will be able to finance a sus- agricultural markets, particularly in Europe. But tainable expansion in imports. Furthermore, in the even under these favorable conditions, per capita Exports of primary goods Imports of goods 1985-95 1985-95 1965-73 1973 -80 1980-85 High Low 1965-73 1973 -80 1980-85 High Low Country group 3.8 1.1 1.4 4.3 1.5 5.8 5.9 0.9 7.7 3.4 Developing countries 1.6 3.6 3.1 4.6 2.0 0.8 6.1 5.9 6.0 1.7 Low-income countries 4.5 1.2 -1.5 4.9 2.4 3.4 2.1 -3.0 3.9 1.2 Africa -0.6 5.2 5.4 4.4 1.9 -0.5 7.7 8.2 6.4 1.8 Asia 4.2 -0.4 -0.1 4.0 0.8 3.7 9.1 -2.0 7.0 1.6 Middle-income oil exporters 3.8 3.3 2.8 4.5 2.1 8.0 4.7 0.9 8.3 4.4 Middle-income oil importers Major exporters of 5.5 3.8 3.6 4.7 2.2 9.6 4.8 1.1 8.9 4.9 manufacturers 1.2 2.4 1.4 4.3 1.7 3.6 4.3 0.0 5.6 2.1 Other oil-importing countries 49 Box 3.2 How a drop in the price of oil affects developing countries Does the developing world gain from cheaper oil? All the short term. Because oil has a greater weight in the things considered the answer is yes. If the price of oil price deflators for the United States than in those for fell from around $20-22 a barrel to $10-12 a barrel and European countries, price levels and interest rates can stayed there for the next five years, the direct loss for be expected to fall more in the United States than in oil-exporting developing countries (lost oil revenue) Europe; as a consequence, the dollar would also tend would outweigh the direct benefits for oil importers. to depreciate. But for developing countries as a group, the indirect Although the total value of developing countries' ex- effects of a $10-a-barrel price fall would more than off- ports would fall (because of lower worldwide infla- set the direct impact. tion), the volume of their exports would rise. The value The crucial indirect benefits for developing countries of exports from the non-oil-exporting regions would derive from the impact of an oil price decline on the also fall, partly because of the drop in the rate of infla- industrial countries. Developing countries would ben- tion and partly because each region exports some oil. efit from the boost to export demand and lower inter- Box tables 3.2A and 3.2B provide conservative esti- est rates that cheaper oil is likely to create in industrial mates of the effect of a $10-a-barrel decline in the price countries. Under the oil price fall postulated above, of oil on developing countries. The first table shows GDP growth in industrial countries would increase by the effect on the nominal value of exports, interest pay- at least 0.4 percentage points a year from 1986 to 1990 ments, and lending, and the second table shows the according to our estimates.1 This would lead to a effect on export and import volumes. greater demand for exports from developing countries. While the data in these tables show that oil- However, some developing countries would experi- importing developing countries would gain, they also ence an offsetting negative indirect effect because of show the magnitude of the negative impact on oil- lower remittances from migrant workers employed in exporting developing countries. For the middle- high- and middle-income oil-exporting countries. income oil exporters, export revenues would fall by 24 In industrial countries, the drop in the price of oil to 28 percent between 1986 and 1990 (see Box table would cause both inflation and interest rates to fall in 3.2A). As a consequence, it is likely that these coun- tries would be less able to obtain new capital inflows and thus would have to reduce their domestic expendi- 1. Other estimates tend to exceed this figure. To the extent that tures in order to lower their real imports. The magni- OECD growth is higher than postulated here, the net positive effect of the oil price decline on developing countries will also exceed the tude of the reduction needed in real imports could be estimates shown here. as much as $20 billion to $30 billion a year. This could Box table 3.2A Estimated effects of a drop in the price of oil of $10 per barrel on export revenues, interest payments, and medium- and long-term private lending to developing countries, 1986, 1987, and 1990 Interest payments on Export revenues niediuni- and long-term debt Difference in Percentage Difference in Percentage billions of dollars difference billions of dollars difference Country group 1986 1987 1990 1986 1987 1990 1986 1987 1990 1986 1987 1990 Developing countries -42.8 -49.7 -54.4 -8.3 -8.6 -6.4 -0.7 -4.7 -3.6 -1.1 -7.0 -5.1 Low-income countries -3.2 -3.7 -3.2 -5.2 -5.4 -3.1 0.0 -0.4 -0.3 0.0 -7.3 -3.2 Africa -0.3 -0.4 -2.9 -3.9 -3.1 -0.5 0.0 -0.1 0.0 0.0 -4.9 0.0 Asia -2.9 -3.3 -5.6 -5.7 -3.1 -2.8 0.0 -0.3 -0.3 0.0 -8.3 -3.4 Middle-income oil exporters -32.3 -36.1 -44.0 -27.9 -27.7 -24.0 -0.2 -1.5 -1.0 -1.1 -7.1 -5.0 Middle-income oil importers -7.3 -9.8 -7.2 -2.2 -2.6 -1.3 -0.4 -2.7 -2.3 -1.1 -7.0 -5.5 Major exporters of manufactures -5.8 -7.5 -4.9 -2.1 -2.4 -1.1 -0.3 -2.2 -2.0 -1.1 -7.4 -6.4 Other oil-importing countries -1.5 -2.3 -2.3 -2.5 -3.4 -2.3 -0.1 -0.5 -0.3 -0.9 -5.6 -2.9 Note: Data are based on the difference between the base line price per barrel of oil-$20 in 1986, $22 in 1987, and $23 in 1990-and the scenario price of $10 less. Source: Fleisig (background paper). 50 Box table 3.2B Estimated effects of a drop in the price of oil of $10 per barrel on developing countries' trade, 1986, 1987, and 1990 Exports On ports Difference in Percentage Difference in Percentage billions of 1980 dollars difference billions of 1980 dollars difference Country group 1986 1987 1990 1986 1987 1990 1986 1987 1990 1986 1987 1990 Developing countries 2.4 9.2 17.6 0.5 1.8 3.0 8.7 11.2 5.9 1.6 2.0 0.9 Low-income countries 0.2 1.0 2.2 0.4 1.7 3.1 2.8 3.8 4.8 3.1 4.2 4.8 Africa l).0 0.1 0.2 0.3 1.0 1.8 0.6 0.8 0.8 3.7 5.7 5.1 Asia 0.2 0.9 2.0 0.5 3.8 3.4 2.2 3.0 4.0 3.0 4.0 4.7 Middle-income oil exporters 0.6 2.4 4.6 0.4 1.7 2.7 -19.0 '-23.8 -31.3 -16.9 -21.7 -24.5 Middle-income oil importers 1.5 5.8 10.8 0.5 2.0 3.1 24.9 31.2 32.4 7.1 8.4 7.0 Major exporters of manufactures 1.3 5.2 9.6 0.6 2.1 3.3 19.5 24.4 24.9 7.1 8.2 6.7 Other oil-importing countries 0.2 0.6 1.2 0.3 1.2 2.1 5.4 6.8 7.5 7.2 8.9 8.6 Note: Data are based on the difference between the base line price per barrel of oil-$20 in 1986, $22 in 1987, and $23 in 1990-and the scenario price of $10 less. Source: Fleisig (background paper). be achieved by reducing real CDI' through increased export revenues by about $60 billion in aggregate. taxes, reduced government spending, and tighter Some of the pressure to reduce output could be off- monetary policy. If the oil exporters reduced imports set if oil-exporting developing countries undertook by these measures, their GDP levels could fall by as substantial devaluations. The rise in the price of traded much as 6 to 12 percent below what they would have goods relative to nontradables could raise exports, been otherwise. That would cut their average rates of lower imports, and thereby assist the economy to ad- growth by roughly four percentage points annually just. This would offset some of the loss of output that during the period of adjustment. The same price de- might otherwise occur. But while such adjustment cline would also adversely affect the growth prospects would be necessary, the supply response of exports of high-income oil-exporting countries, It is estimated may take time, and some output loss in the short term that a $10 decline in the price of oil would reduce their would be unavoidable. Medium- and long-term private lending Dtfference tn billio,ts of dollars Percentage difference 1986 1987 1990 1986 1987 1990 Country group -1.4 -4.1 -15.9 -5.5 -16.6 - Developingcountries 0.0 -0.1 -0.4 -0.2 -0.7 -3.9 Low-income countries 0.0 0.0 0.0 0.0 0.0 0.0 Africa 0.0 -0.1 -0.4 0.0 -0.7 -3.4 Asia -0.4 -1.3 -4.6 - - - Middle-incomeoilexporters -1.0 -2.7 -11.0 -7.7 -24.0 Middle-income oil importers Major exporters of -0.9 -2.6 -10.5 -10.0 -29.6 - manufactures 0.0 -0.1 -0.5 0.0 -5.0 20.4 Otheroil-importingcountries 51 Box 3.3 The sub-Saharan Africa debt problem Although the absolute size of sub-Saharan Africa's increase in net capital flows from multilateral sources debt is relatively small, the cost of servicing it is not. in 1984 was outweighed by the decline in net bilateral Total long- and short-term liabilities increased from flows. When the precipitous drop in net private flows $38.5 billion in 1978 to approximately $80.0 billion in is also taken into account (they foil from a peak of $4.3 1984, or from 30 percent of the region's combined GNP billion in 1982 to a negative $0.3 billion in 1984), the to 50 percent. Although much of low-income Africa's magnitude of the problem becomes apparent. loans come from bilateral and multilateral sources on Moreover, the debt burden is not distributed equally. concessional terms, debt service obligations as a per- In some countries, including Botswana, Cameroon, centage of exports of goods and nonfactor services and Lesotho, the debt service ratio is less than 15 per- have still risen to unsustainable levels. cent; in others, it is more than 50 percent. And, while Box figure 3.3 shows the latest available data on the some countries' debt is primarily from commercial cost of servicing long-term debt in sub-Saharan Africa sources (for example, Côte d'Ivoire, Nigeria, and Zim- as a whole and in two subgroups, low-income IDA babwe), for others it is largely official (for example, countries and others. The data for 1979-84 are what Tanzania, Zaire, and Zambia). countries actually paid out in principal and interest, A total of ten countries in the region rescheduled those for 1985 and onward are what they were sched- debt at the Paris Club in 1985, matching the record of uled to repay based on existing debt. Clearly, sched- 1983 and 1984. But a potentially more serious problem uled debt service payments greatly exceed the pay- emerged in 1985. Several sub-Saharan countries did ments actually made. Total debt service was $6.4 not reschedule at the Paris Club primarily because they billion in 1983 and $7.9 billion in 1984, whereas sched- were unable to reach agreement with their creditors on uled payments are about $12.0 billion in 1985 and 1986. adjustment programs. Most of these countries are ad- The debt service ratio, which had been 21.6 percent in ditionally hampered by arrears to the IMF, which tech- 1984, is scheduled to rise to a projected 33.2 percent in nically prohibits rescheduling negotiations. 1985 for the continent as a whole. For IDA countries, Can African countries grow fast enough to meet ex- the increase is even larger, rising from 18.5 percent to isting debt obligations and maintain adequate domes- 39.6 percent. tic investment? The prospects are poor. Although it Though debt payments have not been the funda- may be possible to manage the debt obligations of the mental cause of Africa's low growth, the debt problem non-IDA countries through domestic policy reforms is becoming more acute for three principal reasons: and rescheduling (given strong economic growth in First, the proportion of debt payments that are not the world economy), this will not be enough for a eligible for rescheduling (mainly repayments on loans group of approximately twelve IDA countries. Even in from multilateral organizations) is rising rapidly. Sec- the High case, these countries could not generate the ond, the process by which high scheduled debt repay- export earnings they need to finance debt obligations ments are translated into lower manageable actual pay- and the investment required to support growth. This ments is proving very costly. It has created an would be true even if a large portion of the debt were atmosphere of uncertainty, which reduces confidence rescheduled. and discourages private investment. Third, net finan- This year's World Bank report on sub-Saharan Africa cial flows to sub-Saharan Africa have fallen substan- (1986a) argues that it is possible to achieve a lasting tially. As the data in Box table 3.3 show, the small solution to the region's debt problem. But this will Box table 3.3 Sub-Saharan Africa's net public flows, 1978-84 (millions of dollars) Type of flow 1978 1979 1980 1981 1982 1983 1984 Total net flows 5,861.4 6,372.3 7,158.4 7,091.3 8,185.4 7,650.3 2,753.0 Official creditors 2,512.5 3,527.5 3,788.0 3,944.7 3,846.5 4,034.9 3,062.2 Multilateral 1,347.5 1,281.0 1,799.7 1,649.8 1,890.9 1,782.5 1,834.1 Bilateral 1,164.9 2,246.5 1,988.3 2,294.9 1,955.6 2,252.4 1,228.1 Private creditors 3,348.9 2,844.8 3,370.4 3,146.7 4,338.9 3,615.4 -309.2 Suppliers 341.2 87.5 409.0 140.7 122.0 41.8 170.7 Financial markets 3,007.7 2,757.3 2,961.4 3,005.9 4,216.8 3,573.6 -479.9 Source: World Bank World Debt Tables, 1985-86 edition. 52 require a coordinated effort by official agencies, com- mercial banks, and the African countries. Box figure 3.3 Long-term public debt service as a The first step must be a commitment to the type of percentage of exports in sub-Saharan Africa, 1979-87 domestic reforms recently implemented by Ghana, Percent Togo, and Zambia. The report argues that the key areas on which governments should focus are the in- 40 centive framework, public investment, and domestic savings. The aim should be to correct the bias against Sub-Saharan Africa agriculture and exports, which often favors urban 30 wage earners. A greater reliance on prices and markets is essential if the level and efficiency of investment are Non-IDA countries to rise. This would mean redefining the role of the 20 government to free resources for the private sector and to create an environment where the profits from in- IDA countries vestment would once again become commensurate 10 with the risks. This is particularly important if foreign direct invest- ment is to be encouraged so as to provide badly 0 needed resources over and above domestic savings 1979 1981 1983 1985 1987 plus foreign lending. In the past, many sub-Saharan countries actively discouraged overseas investment. Note: Data for 1984 are estimated; data for 1985-87 are projected. But it can play a useful role. It directs foreign capital toward investments with potential returns that exceed interest rates; it is often associated with transfers of deficits, and inflationary monetary policies in sub- technology; and, more important, it keeps the risks of Saharan Africa have created major distortions in incen- the investment firmly with those who provide the capi- tives. Neither savings nor investment will increase un- tal. If the investment fails to yield an adequate return, less people are confident that policy-induced the investor takes the loss, whereas if a publicly guar- macroeconomic instability will not penalize those that anteed loan is misspent, the repayment obligations forgo current consumption. continue. Since the reduced flow in nonconcessional lending is A narrower definition of the activities that properly appropriate, given the weak creditworthiness of many belong to government would also help to focus public African countries, domestic reforms will have to be resources (including the time of overstretched officials) supported by increased bilateral and multilateral con- on essential public goods and services. Many countries cessional loans, at least in the immediate future. This is could achieve substantial gains in efficiency by ensur- particularly so for IDA countries, where conventional ing that public investment programs are prioritized ac- debt rescheduling will merely postpone, and not solve, cording to their rates of return and by keeping invest- the debt problem. ment spending consistent with resource availability, But, if Africa's decline is to be reversed, such conces- after allowing for crucial recurrent and maintenance sional lending must go hand in hand with policy re- expenditures. forms. This year's sub-Saharan Africa report recom- Policies to increase domestic savings are also re- mends that for low-income Africa the mandate of the quired to ensure that domestic investment is not un- consultative groups of donors, which meet under the duly constrained by the reduced flow of foreign sav- World Bank's auspices, be adapted to provide a more ings. Increasing public savings implies a renewed comprehensive assessment of resource needs and pol- effort to reduce budget deficits, particularly the operat- icy reform. While donors should be expected to make ing losses of inefficient government-owned parasta- decisions on resource transfers with reference to the tals. Private savings could be raised through tax reform medium-term financial needs of the country, recipient and by allowing domestic interest rates to reflect the governments should, for their part, clearly outline the inflation-adjusted market value of capital. program of adjustment that they intend to follow. In- If these microeconomic reforms are to work, they stitutions such as the Bank and the IMF will have an must be supported by consistent fiscal, monetary, and important role in monitoring the policy reforms and in exchange rate policies. As demonstrated in Part II of helping direct the loans and grants to the most produc- this Report, inappropriate exchange rates, large fiscal tive purpose. 53 growth is a low 0.8 percent. Sub-Saharan Africa expansion in exports to below what has recently could exceed this level of performance only by been achieved (see Table 3.3). Since China is a net pushing even more strongly ahead with the policy oil exporter, a greater effort to stimulate alternative changes that some countries have begun to imple- export activities via trade policy reform would be ment. This domestic adjustment effort should be necessary to offset a marked decline in its export assisted by a coordinated international effort to in- earnings. While some low-income Asian countries crease the level of external resources available and have the capacity to increase their current external the efficiency with which they are used. The types debt obligations, lower export growth would ulti- of domestic policies and supportive international mately limit their ability to increase imports and actions required are discussed in Box 3.3. would thereby restrict growth. Those high-growth middle-income East Asian The Low case countries which carry modest debt burdens and have flexible economies could still attain annual The repercussions of the Low case scenario vary per capita GDP growth rates of close to 3 percent widely among country groups. For low-income under the Low case. Other middle-income oil im- Asia a downturn in world growth would slow the porters would suffer from continued low commod- Box 3.4 The debt overhang and the heavily indebted middle-income countries In 1985 it became widely accepted that the debt- tion over the next decade needs to increase by at least servicing problems of some developing countries that much. Otherwise, it may not be politically possi- would last longer than had earlier been thought and ble to maintain the course of adjustment. that their solution depends critically on the restoration To achieve even this modest rate of growth, the of sustained growth. heavily indebted countries must aim to reduce external The scale of the problem can be gauged from the debt relative to total output and export earnings. The adjustments made in the early 1980s. The bulk of the efficiency of investment would need to increase, and adjustment has been undertaken through lower de- domestic savings would have to rise from its present mand, which has meant, in practice, reducing imports average rate of about 21 percent to about 26 percent and investment. The volume of imports for the heavily over the next five years. Export growth, boosted not indebted middle-income countries in 1985 was 32 per- only by improved policies in developing countries but cent below its 1981 level. The ratio of investment to also by sustained recovery in industrial countries and GDP fell from 25 percent in 1981 to 18 percent in 1985. trade liberalization policies, would have to average GDP has stagnated since 1980, and per capita incomes about 5 percent a year in volume terms. And interest have declined substantially. The reduction in demand payments need to be moderated by lower real interest has pushed the collective trade balance of these coun- rates, though the impact of this depends on the size tries into a large surplus, which has brought their cur- and makeup of each country's debt. rent account into rough balance. Yet, the main indica- Even with such significant adjustments, restoration tors of debt at the end of 1985 were close to their of growth and creditworthiness in the heavily indebted previous peaks. Despite their adjustment efforts, these group would require satisfactory growth in industrial countries seem to be as far as they ever were from countries and net flows of capital of the order of $14 reconciling growth and creditworthiness. billion to $21 billion a year over the next five years. The problem is so intractable that for the biggest This net capital inflow would have to come from loans debtors sound policies and world growth, though es- from commercial banks, export credit agencies, and sential, will not be enough to restore growth. Because multilateral lenders, as well as equity investment and debt-servicing obligations absorb 5 to 7 percent of GNP repatriated capital. in many countries, domestic savings are not enough to Despite the size of these projected flows, however, service debt and maintain the level of investment the debt of these countries would still be growing more needed to permit adequate growth. Thus, a significant slowly than their GDP, so that the debt-to-GDP ratio amount of new private and official lending is required. would decline significantly, as would the aggregate But how much? debt service ratio. According to World Bank estimates, the growth rate of real GDP in seventeen heavily indebted countries needs to average at least 4 percent a year for the next Note: All data in this box refer to seventeen countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Côte d'lvoire, Ecuador, ten years. This permits a per capita growth rate of con- Jamaica, Mexico, Morocco, Nigeria, Peru, the Philippines, Uruguay, sumption of 1 percent annually. Per capita consump- Venezuela, and Yugoslavia. 54 ity prices, high interest rates, and reduced capital growth. But the level of those resources is still im- flows. Their imports would be unlikely to rise at portant. Foreign capital flows are one such re- much more than a slow 2.1 percent a year, and source: they supplement domestic savings and can investment would be contained at present de- compensate temporarily for foreign exchange pressed levels. That would, in turn, hold per cap- shortages. Tables 3.4 and 3.5 provide a powerful ita growth down to a low 1.4 percent a year on illustration of the way the availability of these re- average. Access to foreign capital would be a criti- sources changes between the High and Low cases. cal factor in determining how much these middle- In the High case, increased demand for income economies are led to squeeze domestic de- developing-country exports, lower interest rates, mand because of slower growth in industrial and a resumption of voluntary capital flows to a countries (see Box 3.4). large group of countries would encourage growth. Because of the fall in oil prices, the prospects for This, in turn, would gradually ease the debt bur- oil exporters have deteriorated sharply from the den of the developing countries. But in the Low Low case presented in the 1985 World Development case, a reversal of these external circumstances Report. Under the conditions prevailing in the particularly lower exports and restricted capital world economy last year, the GDP per capita flowswould seriously test the ability of develop- growth estimated for middle-income oil-exporting ing countries to adjust. That, in turn, might precip- countries in the Low case was 2.0 percent during itate a sweeping restructuring of international fi- the period 1985-95; this year the estimate has been nancial obligations. revised downward to less than 1.0 percent. Cheaper oil would reduce oil exporters' growth The High case rates under any circumstances, but the Low case reflects the additional effects of significantly re- In the High case, lower interest rates would reduce duced capital inflows and lower demand. As dis- the interest costs on medium- and long-term debt cussed in the following section on capital flows from $58.5 billion in 1985 to $47.3 billion by 1995 and in Box 3.2, this combination seriously curtails (in constant prices, see Table 3.4). Sustained the import capacity of both middle- and high- growth in real export earnings during the same income oil exporters just as sluggish world de- period would result in a sharp reduction in debt mand makes a shift to alternative export activities service as a percentage of exports, from 21.9 per- more difficult. cent in 1985 to 13.4 percent in 1995. In the long The implications for low-income Africa are even term this would make developing countries more more serious. Depressed demand for primary creditworthy. Additional borrowing would in- commodities and continued protection in indus- crease the debt outstanding and disbursed from trial countries would result in a slow increase in $723 billion in 1985 to $864 billion in 1995 and thus export earnings from the current low level. Even provide the additional financing required to sus- those countries currently engaged in serious policy tain increased current account deficits, More than reform efforts (for example, Guinea, Kenya, and one-half of the current account deficit by 1995 is Malawi) would have difficulty maintaining attributable to the rapidly growing economies growth. Aid would not increase enough to offset within two country groups, low-income Asia (par- the continued decline in net private capital inflows ticularly India and China) and major exporters of from abroad. As a result, imports would barely manufactures. Indeed, some of the economies in increase beyond their already depressed levels. low-income Asia have the capacity to increase their Without resources to increase investment, many debt service ratios in the High case. Oil exporters low-income African countries would suffer an- would also be able to sustain larger current ac- other ten years of declining per capita incomes. count deficits as the strengthening of the oil mar- Private investors would remain hesitant, and ket in the early 1990s and the growth of other ex- many countries would risk sliding further into a port activities reestablish their capacity to carry vicious cycle of economic deterioration and politi- additional debt. cal instability. In the High case, the improved creditworthiness of many developing countries would lead to a re- Capital flows and debt versal of the recent decline in net financing flows (see Table 3.5). In constant prices, total net flows How efficiently developing countries use their re- would increase from a low $62.3 billion in 1985 to sources largely determines their rate of economic $97.0 billion by 1995. This represents a steady 55 Table 3.4 Current account balance and its financing in developing countries, 1985 and 1995 (billions of constant 1980 dollars) All developing countries Low-income Africa Low-income Asia 1995 1995 1995 Item 1985' High Low 1985' High Low 1985' High Low Net exports of goods and nonfactor services -4.1 -87.0 -24.0 -4.2 -4.3 -3.4 -23.0 -22.4 -9.0 Interest on medium- and long-term debt -58.5 -47.3 -49.4 -1.3 -0.8 -0.8 -2.2 -7.3 -5.6 Official -13.1 -15.9 -16.1 -0.8 -0.8 -0.8 -1.2 -2.5 -2.3 Private -45.4 -31.4 -33.3 -0.4 0.0 0.0 -1.0 -4.8 -3.3 Currentaccountbalanceb -41.3 105.4 -50.3 -5.2 -4.3 -3.7 -17.1 -22.4 -7.8 Net official transfers 15.2 19.8 17.2 2.3 2.8 2.4 2.0 2.5 2.2 Medium- and long-term loans 36.1 58.1 18.6 1.4 1.7 1.5 6.8 18.7 4.9 Official 21.2 28.8 15.5 0.5 1.9 1.6 4.8 7.4 5.0 Private 15.0 29.3 3.1 0.9 -0.2 -0.2 2.0 11.4 -0.1 Debt outstanding and disbursed 722.9 864.2 560.9 28.9 28.6 23.4 60.1 167.4 92.7 As a percentage of GNP 33.0 22.3 17.2 58.6 38.5 33.9 10.2 15.5 10.3 As a percentage of exports 135.7 88.5 86.7 318.5 174.7 206.3 120.7 156.7 129.8 Debt service as a percentage of exports 21.9 13.4 16.7 35.8 13.5 17.2 11.9 18.0 18.0 Note: The table is based on a sample of ninety developing countries. The GDP deflator for industrial countries was used to deflate all items. Details may not add to totals because of rounding. Net exports in this table exclude factor services and thus differ from those in Table 3.5. Net exports plus interest does not equal the current account balance because of the omission of net workers' remittances, private transfers, and investment income. The current account balance not financed by official transfers and loans is covered by direct foreign investment, other capital (including short-term credit and errors and omissions), and changes in reserves. Ratios are calculated using current price data. Table 3.5 Net financing flows to developing countries in selected years, 1980-95 Amount (billions of dollars at constant prices) Growth rate (percent)' 1995 1985-95 Type of flow 1980 1984 1985 High Low 1970-80 High Low Official development assistanceb 23.4 21.6 22.4 29.6 25.7 5.9 2.8 1.4 Nonconcessional loans 47.1 33.4 28.9 48.3 10.1 12.6 5.3 -10.0 Official 8.7 13.9 14.0 19.0 7.0 12.6 3.1 -6.7 Private 38.4 19.5 15.0 29.3 3.1 12.6 7.0 -14.7 Direct investment 10.6 10.8 11.0 19.1 14.2 5.8 5.7 2.6 Total 81.1 65.9 62.3 97.0 49.9 9.2 4.5 -2.2 Memo items Net export of goods and nonfactorservices -92.8 -61.9 -66.5 -135.2 -76.5 8.9 7.4 1.4 Currentaccountbalance'1 -67.8 -35.3 -41.3 -105.4 -50.3 7.5 9.8 2.0 ODA from DAC countries as a percentage of their GNP 0.38 0.38 0.37 0.37 0.37 - - - Note: All items are net of repayments. Data are for a sample of ninety countries. Average annual percentage change. Includes ODA grants (official transfers). DAC reporting includes, and the World Bank Debtor Reporting System excludes, ODA flows from nonmarket economies and the technical assistance component of grants. There are no differences in coverage of recipient countries in the two data sources. Net exports of goods and nonf actor services plus net investment receipts minus interest on medium- and long-term debt. Excludes official transfers. 56 Middle-income countries Oil-exporting Major exporters Other oil-importing countries of manufactures countries 1995 1995 1995 1985' High Low 1985' High Low 1985' High Low Item Net exports of goods and nonfactor 15.2 -12.8 6.5 19.8 -35.1 -14.0 -12.0 -12.4 -4.2 services Interest on medium- and long-term -21.1 -13.0 -10.5 -25.5 -20.3 -26.5 -8.4 -5.9 -6.0 debt -3.3 -4.4 -4.4 -4.7 -4.1 -4.3 -3.0 -4.2 -4.4 Official -17.8 -8.6 -6.1 -20.8 -16.2 -22.2 -5.4 -1.7 -1.6 Private 5.6 -25.8 -4.9 -0.2 -43.8 -31.2 -13.1 -9.0 -2.7 Current account balance8 2.0 3.4 2.9 5.4 6.9 6.0 3.5 4.3 3.7 Net official transfers 1.8 12.7 -2.4 19.3 21.6 16.5 6.7 3.3 -1.8 Medium- and long-term loans 4.4 7.8 3.7 5.7 4.4 1.9 5.8 7.3 3.2 Off icial -2.6 4.9 -6.1 13.7 17.3 14.5 1.0 -4.0 -5.1 Private 230.2 227.5 111.4 288.9 329.6 263.6 114.8 111.1 69.8 Debt outstanding and disbursed 39.4 24.6 13.6 37.9 22.9 22.9 54.5 30.4 22.2 As a percentage of GNP 160.8 116.4 90.5 108.2 60.5 72.9 180.1 98.5 87.5 As a percentage of exports Debt service as a percentage 31.6 17.4 17.8 17.2 10.7 15.9 26.1 14.7 17.2 of exports Estimated. Excludes official transfers. Net disbursements. growth rate of 4.5 percent a year. As ODA is as- tion of private lending. As commercial banks re- sumed to remain at a constant 0.37 percent of DAC spond to the improved creditworthiness of devel- countries' GNP, it moves in line with their eco- oping countries, within a more stable and growing nomic performance. Thus, an expanding world world economy, private lending would increase economy not only would provide improved export from the low 1985 level of $15.0 billion to $29.3 markets for developing countries but also would billion by 1995, a growth rate of 7.0 percent a year lead to a real increase in the level of concessional over the next ten years. This is, quite appropri- finance. This is crucial for sub-Saharan Africa, ately, much lower than the 12.6 percent rate of where even the higher level of ODA assumed in growth in private lending that occurred during the our High case would be insufficient to avoid future 1970-80 period, when economies adjusted to the debt repayment problems in a dozen or more two oil price increases. Official nonconcessional countries. Appropriate domestic policies, particu- lending is also anticipated to increase at about 3.1 larly in newly industrialized countries, would at- percent a year. The resulting net flow of official tract more foreign investment. Thus, private direct nonconcessional lending of $19.0 billion in real investment could increase at about 5.7 percent a terms by 1995, up from $14.0 billion in 1985, re- year, as rapid growth in industrial countries pro- flects the third leg of a combined effort by bilateral, duces more investment-seeking capital and posi- multilateral, and private financiers to assist devel- tive real rates of interest make equity finance more oping countries in adjusting. attractive to developing countries. The increase in total net capital inflows and the If a concerted effort is made by developing coun- corresponding larger current account deficit in the tries to adjust and support from bilateral and mul- High case are sustainable because export earnings tilateral agencies is increased, total nonconces- increase faster than debt service payments. A sional capital flows would also grow. Under the higher rate of growth in the world economy and High case, they would increase at a moderate 5.3 freer trade create the conditions for this to occur. percent a year, primarily as a result of the restora- For developing countries as a whole, total debt 57 would decline as a proportion of GNP from 33.0 however, only the most efficient developing coun- percent in 1985 to 22.3 percent in 1995. As a pro- tries could achieve thismainly by increasing their portion of exports the figures would be 135.7 per- share of export markets. In aggregate this situation cent and 88.5 percent, respectively. These broad is untenable. Squeezed between higher debt ser- measures indicate the improvement in creditwor- vicing and reduced capital flows, many developing thiness as most of the developing countries grow countries would face an unenviable choice: cut im- out of the debt problem. Before this could happen, ports yet further by reducing investment and low- however, additional international initiatives would ering consumptionwhich will reduce growth and be required in the near term to address the press- exacerbate social tensionsor reschedule debt, if ing debt problems of some heavily indebted coun- possible. Without growth, creditworthiness can- tries and a group of low-income sub-Saharan not be restored. countries. The type of initiatives required are dis- cussed in the last section of this chapter. International initiatives and the role of the Bank The Low case The duration and magnitude of the economic and financial crises which many developing countries In the Low case, total interest payments would have experienced over the past half decade have decline not because of lower interest rates (as in heightened recognition of the longer-term, rather the High case) but because of a decline in capital than temporary, nature of the debt problem. A flows to developing countries. Total debt outstand- consensus is evolving that the restoration of eco- ing and disbursed would decline from $723 billion nomic growth in these countries is critical to in 1985 to $561 billion in 1995 (see Table 3.4). This achieving a lasting and effective solution. The pur- decline in the real level of outstanding debt would suit of this adjustment with growth objective will entail a much lower current account deficit than require close collaboration among the govern- the one implied in the High case. Given slow ex- ments of the developing countries, the govern- port growth, the level of imports and investment ments of the industrial countries, the multilateral would be constrained below the level attained in institutions, and, in many cases, the commercial the High case, which would inevitably result in banks. slower growth. Recently, attention has focused on the heavily As developing countries become less credit- indebted middle-income developing countries, worthy and growth in industrial countries slows in primarily because of the potential impact that the Low case, total net capital flows to developing action or inaction in addressing their problems countries would fall from $62.3 billion in 1985 to could have on the international economy. In the $49.9 billion in 1995 (see Table 3.5). The Low case fall of 1985, U.S. Secretary of the Treasury James assumes, perhaps optimistically, that industrial A. Baker III suggested a plan of action to address countries would maintain development assistance the problems of these countries. It emphasized the at 0.37 percent of their GDP. But the slower growth critical importance of an adjustment with growth of industrial countries' GNP in the Low case strategy and supported the proposal for a collabo- would mean that by 1995 ODA would be $3.9 bil- rative international effort by debtors and creditors lion less than in the High case. As commercial alike. Restoring growth is no less important for banks reduce their exposure in uncreditworthy low-income countries in sub-Saharan Africa. The countries, net private lending would also fall from impact that these economies have on the world the already low level of $15.0 billion in 1985 to $3.1 economy is smaller, but the costs of a further de- billion in 1995. This low figure reflects very limited cline in their per capita incomes is very high in rescheduling as commercial banks gradually re- terms of its impact on the poor. duce their portfolio in noncreditworthy develop- ing countries. Under these conditions the develop- Increased private and official net flows ing countries would have to make very painful adjustments to a sluggish world economy with di- Mobilizing additional capital flows from private minished capital inflows. and official sources will be a crucial factor in estab- To maintain creditworthiness, developing coun- lishing the conditions required for growth. On the tries would have to improve their trade balances, private side, Baker's initial proposal envisioned an mainly by increasing exports and not by cutting increase in the net exposure of commercial banks imports further. With slow growth in world trade, during the next three years. One estimate of the 58 increase in net flows required to help the heavily The IMF has recently established a structural ad- indebted middle-income countries adjust is pro- justment facility which is expected to lend a total of vided in Box 3.4. To attain this transfer it will be SDR 2.7 billion on concessional terms over the next necessary to strengthen the link between private five years to low-income countries undertaking bank debt restructuring, the provision of addi- macroeconomic and structural adjustment. The tional new financing, and comprehensive growth- other major source of additional multilateral flows oriented policy reforms by recipient countries. In is likely to be the International Development Asso- some cases this collaborative effort needs to in- ciation (IDA). The negotiation of the Eighth Re- clude a strengthening of the links between the plenishment of IDA (IDA-8) is now under way. commercial banks and institutions such as the The critical need of all low-income countries, espe- World Bank that are capable of assisting in the de- cially those in sub-Saharan Africa, coupled with velopment and monitoring of policy reform pro- the role which the World Bank will have to play in grams. This effort will, over time, help mobilize the designing and financing of adjustment pro- private flows by reducing the private banks' per- grams in these countries, argues strongly for a sub- ception of risk. On the official side, a comparable stantial replenishment. Virtually all ministers at effort needs to be made to increase flows from ex- the April 1986 Development Committee meeting port credit agencies. expressed the strong hope that an IDA-8 replenish- The increased economic stability provided by ment of $12 billion will be achieved. This would corrective domestic reforms, coupled with re- maintain in real terms the concessionary resources newed access to external capital flows, will also now available through IDA-7 and the Special Facil- help restore foreign private investors' confidence. ity for Sub-Saharan Africa. Aside from providing an additional source of fi- nance, direct private foreign investment has an- The role of international trade other advantage: it keeps the risks associated with investments that require foreign finance firmly in Increased export earnings for developing countries the hands of foreign investors and does not, as is is the second linchpin in the effort to reestablish the case for guaranteed loans, increase the obliga- sustainable growth and creditworthiness. This re- tions of the government. quires the reduction of the disincentives to exports An adjustment with growth strategy is no less created by the developing countries' own policy important for the low-income countries of sub- regimes in both industry and agriculture (see Saharan Africa. While some progress has been Chapters 4 and 5). It is therefore important that made in pursuing structural adjustment, much many of these countries undertake a rationaliza- more remains to be done to correct the accumu- tion and liberalization of their trade regimes in or- lated policy distortions of the past. As in the heav- der to develop the export potential of their econo- ily indebted middle-income countries, the prime mies. responsibility rests with the domestic policyma- Developing-country exports are also affected by kers. They must implement reforms to reduce dis- the trade policies of the industrial countries. The tortions, improve the allocation of resources, and 1980s have been marked by a rise in protectionist increase domestic savings. Additional external re- pressures in both manufacturing and agriculture. sources will ease adjustment toward growth. But Particularly worrisome is the increasing use of unlike the middle-income countries, most of these nontariff measures to restrict trade. Industrial- countries have very limited creditworthiness and country tariff and nontariff barriers are often more debt-servicing capacitya dozen or so are facing restrictive on those products of specific interest to acute debt difficulties. This means that external the developing countries than on others. This is private nonconcessional lending is likely to remain seen most dramatically in the restrictions on agri- limited for at least the remainder of the decade. cultural and textile trade. Agricultural trade policy This implies the need for significant increases in issues have, however, been largely excluded from official concessional flows to support countries earlier multilateral trade negotiations. While resis- committed to reform. Bilateral increases could in- tance remains strong, preliminary discussions volve both additional aid flows and more extensive within the GAU have pointed to an increased will- debt relief actions. ingness to open the agricultural trade issue to in- The bulk of the multilateral flows will come from ternational discussion. the International Monetary Fund and the Interna- Experience has shown that a multilateral ap- tional Bank for Reconstruction and Development. proach can be effective in stemming the tide of 59 protectionist action and achieving broad-scale re- The larger role played by donors in providing ductions in trade barriers. The GATF is now pre- finance to low-income countries also increases the paring for a new round of multilateral negotia- need for coordination among donors to improve tions. As argued in Box 3.1, it is important that effectiveness. Individual donors at times have pur- developing countries in general, and middle- sued their own agenda, which can sharply reduce income countries in particular, participate in the the benefit derived from their assistance. Some re- negotiations. Because of the potential benefit to in- cipient governments have also had difficulty man- dustrial and developing countries alike, particu- aging a large number of donors and donor larly for agricultural commodities, this trade liber- projects. This, coupled with the increased need to alization effort deserves strong international provide aid in quick-disbursing form to support support. policy action and for rehabilitation and mainte- nance, has led donors and recipients to look to the The role of the World Bank World Bank to increase its coordination efforts. Monitoring arrangements for adjustment pro- There are four dimensions to the World Bank's ex- grams will have to be designed on a case-by-case panded role in undertaking initiatives to revive basis, in light of each borrower's relationship with growth in developing countries: the Bank, the IMF, and other multilateral institu- To assist in the development, implementation, tions. It is clear that increased collaboration be- and monitoring of medium-term adjustment pro- tween the World Bank and the IMF is required. grams in pursuit of the objectives of member coun- The areas of economic policy dealt with by each tries committed to policy reform. institution are related and complementary, as is To expand greatly its own lending in support the financial assistance each can provide. Further- of such programs. more, macroeconomic stabilization and structural To extend its catalytic role and, consistent with adjustment must be pursued simultaneously and its role as preferred creditor, help establish a in a unified way: in short, as two sides of the same process for coordinated mobilization of private and coingrowth. Bank-Fund collaboration has grown official support of developing countries' efforts. substantially in recent years as the two institutions To strengthen coordination with the IMF. have sought to increase the complementarity of To play this expanded role effectively, the Bank their programs and their capacity to respond to the would also need to use its own human and finan- needs of developing countries. Exploration of cial resources in an even more efficient way. ways to further improve this collaboration con- Since the introduction of its structural adjust- tinues. ment lending program in 1980, the World Bank has An integral component of this concerted interna- been involved in designing and monitoring adjust- tional adjustment with growth effort is increased ment programs to maintain or restore growth. As a World Bank lending to countries that implement result, an increased proportion of its lending has serious policy reform. Higher levels of lending are been in the form of fast-disbursing policy-based needed both to support these reform programs loans and loans in support of maintenance and and to stimulate other financial flows. The timing rehabilitation projects. The Bank's involvement in and level of additional World Bank lending will, of this adjustment effort is needed not only to help course, depend on the adoption and implementa- resolve the difficulties involved in developing and tion by these countries of medium-term adjust- implementing such medium-term programs, but ment programs. Since increased lending by the also to generate increased confidence of private Bank will naturally affect its own resource require- and public creditors. In addition to its work on ments, additions to its capital base will be needed policy, reform, the World Bank is supporting the in the near future. As the ministers at the spring acceleration of foreign private direct investment 1986 meeting of the Development Committee through an expanded role of the International Fi- agreed, the Bank should be provided with the ca- nance Corporation (IFC) and through the estab- pacity to increase its quality lending and should lishment of the Multilateral Investment Guarantee not be constrained by lack of capital or borrowing Agency (MIGA), which is designed to promote in- authority in meeting future demand. As a result, creased investment by providing noncommercial increased attention is being given to the issue of risk insurance to investors and a wide range of the potential size and timing of a general capital advisory and technical assistance. increase for the Bank. 60 Part II Trade and Pricing Policies in World Agriculture 4 Agricultural policies in developing countries Exchange rates, prices, and taxation Increased production of food and cash crops and pact of declining commodity prices on the farm higher rural incomes have been important objec- sector. Some pay their producers half the world tives for governments of developing countries. In price for grains (or even less), and then spend pursuing these objectives, governments, with the scarce foreign exchange to import food. Many support of foreign assistance, have made substan- have raised producer prices at various stages, but tial public investments to improve the physical in- have followed macroeconomic and exchange rate frastructure in rural areas, expand irrigation and policies that have left real producer prices un- flood control, and organize research and extension changed or lower than before. Many have set up in agriculture. Resources have also been directed complex systems of producer taxation, and then to programs which aim to raise productivity have set up equally complex and frequently inef- through better farm management and improved fective systems of subsidies for inputs to offset that rural health and education services. In many cases, taxation. Many subsidize consumers to help the these efforts have succeeded in raising food pro- poor, but end up reducing the incomes of farmers duction, as shown in Chapter 1. The spread of the who are much poorer than many of the urban con- Green Revolution in rice and wheat is testimony to sumers who actually benefit from the subsidies. the effectiveness of public expenditures in research Most developing countries pronounce self- and irrigation. sufficiency as an important objective, but follow The general economic policies that developing policies that tax farmers, subsidize consumers, and countries have pursued have, however, limited the increase dependence upon imported food. growth of agricultural production and hampered The discrimination against agriculture derives efforts to reduce rural poverty. In many cases, from several factors. First of all, it is very much an sector-specific pricing and tax policies have also integral part of development strategies that pro- resulted in substantial discrimination against agri- mote domestic industries behind high trade barri- culture. In addition, government interventions at ers. Such strategies are intended to accelerate the all stages of production, consumption, and mar- shift of resources out of agriculture by lowering its keting of agricultural products and inputs, though profitability compared with that of industry: in undertaken to improve the efficiency of markets, other words, by turning the internal terms of trade have frequently resulted in greater inefficiencies between agriculture and industry so that agricul- and lower output and incomes. As a consequence, ture is worse off than it would be if domestic prices farm incomes in many developing countries are were aligned with relative world prices. Agricul- stagnating, and little progress is being made in tural exports suffer as a result; so do agricultural overcoming the problems of poverty. products that compete with imports. This is not Paradoxically, many countries which have been just because their domestic prices become lower stressing the importance of agricultural develop- relative to the prices of protected industrial prod- ment have established a complex set of policies ucts, but also because the costs of the industrial that is strongly biased against agriculture. Thus, inputs the farmers use increase. Moreover, the some developing countries impose taxes on agri- protectionist policies result in an appreciation of cultural exports while lamenting the adverse im- the real exchange rate. This means that traded ag- 61 ricultural goods become less profitable than non- those of sector-specific policies. These policies are traded goods, with further adverse consequences leading determinants of the movement of capital on developing countries' agricultural exports. and labor between agriculture and the rest of the During the past fifteen years, this traditional bias economy, the growth and composition of agricul- against agriculture has often been exacerbated by tural output, and the volume and composition of the way countries have responded to changing trade in agricultural products. They are often the economic circumstances. Some countries have principal sources of bias against agriculture, and as failed to adjust exchange rates sufficiently in pe- such they inhibit the growth of real incomes in riods of rapid inflation, thus allowing their ex- rural areas, where the concentration of poverty is change rates to become overvalued, and have re- greatest. lied instead on excessive foreign borrowing and on ad hoc exchange and trade controls. Such ad hoc Sources of bias measures usually come on top of more permanent trade restrictions and make the discrimination Many developing countries have continued to pro- against agriculture worse. mote industrialization through generous protec- Sectoral policies that keep the domestic farm tion to industry. This strategy increases the prices prices of agricultural products below their world of industrial import substitutes relative to the prices at country borders (adjusted for internal prices of agricultural import substitutes and ex- transport and distribution margins) have also con- ports. It also raises the prices of protected farm tributed significantly to the bias against agricul- inputs. By lowering output prices relative to indus- ture. It makes little difference from this point of try and by increasing the cost of modern inputs, view whether farmers receive low prices because inward-looking strategies implicitly tax agricul- of taxes on their outputs or because of excessive ture. Table 4.1 gives some indication of how the margins charged by parastatal marketing agencies. differential protection given to industry has low- The effects of low prices for farm output are not ered the relative profitability of agriculture in many generally offset by the subsidies that many govern- ments provide on credit and modern farm inputs. Typically, these subsidies lead to rationing and shortages and benefit larger and better-off farmers Table 4.1 Protection of agriculture compared with more than smaller and poorer farmers. manufacturing in selected developing countries This chapter discusses the extent to which Relative Countnj and period Year protection ratio' economy-wide trade and exchange rate policies, as well as sectoral tax and price policies, discriminate In the 1960s Mexico 1960 0.79 against agriculture in developing countries and ex- Chile 1961 0.40 amines the effects of this discrimination on agricul- Malaysia 1965 0.98 tural output and incomes, It also discusses how Philippines 1%5 0.66 costly agricultural taxation can be in practice and Brazil 1966 0.46 points to several alternative ways of moderating Korea 1968 1.18 Argentina 1969 0.46 the costs. Colombia 1969 0.40 The next chapter reviews the rationale for gov- ernment programs for price stabilization, con- In the 1970s and 1980s sumer subsidies, and producer input subsidies Philippines 1974 0.76 all three of which are used to promote a variety of Colombia 1978 0.49 BrazilE 1980 0.65 distributional and income objectives, It is shown 0.88 Mexico 1980 that these programs are far less effective than they Nigeria 1980 0.35 are thought to be in promoting either a more effi- Egypt 1981 0.57 cient allocation of resources or a more even distri- Peru' 1981 0.68 bution of income. Turkey 1981 0.77 Koreab 1982 1.36 Ecuador 1983 0.65 Economy-wide policies and agriculture Calculated as (1+EPR,)/(l+EPR,j, where EPR, and EPR,, are the effective rates of protection for agriculture and the manufacturing Trade, exchange rate, fiscal, and monetary policies sector, respectively. A ratio of 1.00 indicates that effective protection have a significant impact on agriculture in develop- is equal in both sectors; a ratio greater than 1.00 means that protec- tion is in favor of agriculture. ing countries, and their effects often overshadow Refers to primary sector. 62 countries. The ratios in the table show the extent to urban food prices low: consequently, food imports which value added in agriculture has been pro- are implicitly subsidized. Furthermore, in trying to tected relative to value added in industry. With the reduce fiscal deficits, countries usually increase sole exception of Korea, all countries in the sample sectoral taxes on agricultural exports and curtail discriminated against agriculture, especially Nige- subsidy programs for agricultural inputs. As a ria, Colombia, and Egypt. result of both implicit and explicit taxation, But this is not the only way inward-looking strat- agricultureand the low-income groups that de- egies affect agriculture. There is another effect that pend on ittends to bear the brunt of the adjust- works through the real exchange rate (the ratio of ment programs that ensue from destabilizing mac- the prices of traded goods to the prices of non- roeconomic policies. traded goods). Industrial protection makes the real The impact on agriculture can be especially pro- exchange rate lower than it would be otherwise. nounced when import quotas are used, since Thus, the production of import substitutes and ex- changes in the domestic price of an imported com- ports in agriculture suffers for two reasons: in- modity are then determined not by supply, which creased profitability of protected industrial outputs is fixed, but by the level of demand alone. Thus, by and increased profitability of nontraded goods. Re- increasing overall demand, an expansionary fiscal sources move from the traded agriculture sector to policy would raise the domestic prices of goods these other sectors, and as they do, rural real whose imports are restricted. The net effect would wages may rise; this increases the cost of farming, be to reduce relative prices for agriculture and in- which is typically very labor-intensive in develop- crease discrimination against it. ing countries. Capital inflows from abroad and sharp increases Several studies have shown how policies that in the world prices of key exports also cause the protect industry affect the prices of agricultural real exchange rate to appreciate. But this by itself is products compared with the prices of protected not distortionary, although special sectoral mea- industrial products and of nontraded goods. In the sures may be needed to offset the effects on agri- Philippines, from 1950 to 1980, heavy protection culture if the commodity boom is temporary and if for industrial consumer goods meant that prices of factor movements out of agriculture are difficult to agricultural exports were between 44 and 71 per- reverse. Typically, however, countries react to cent lower (depending on the category of imports) commodity booms by initiating expansionary relative to the prices of protected traded goods and monetary and fiscal policies, which leads to infla- were 33 to 35 percent lower relative to the prices of tion and a greater appreciation of the real exchange nontradable goods. In Peru, a 10 percent increase rate than would occur simply because of the favor- in tariffs on nonagricultural importables was found able change in the external terms of trade. The ef- to decrease the prices of traded agricultural goods fects of this reaction continue even after the boom by 10 percent relative to the prices of those import- ends, because by then commitments to large in- ables and by 5.6 to 6.6 percent relative to the prices vestment programs or to large recurrent costs have of nontradables. Similar results have been ob- already been made. This is what happened in Co- tained in countries as varied as Argentina, Chile, lombia (see Box 4.1). Colombia, Nigeria, and Zaire. Policies on money supply and credit, public rev- SECTORAL POLICIES. Policies within the agricul- enues and expenditures, foreign borrowing and tural sectorsuch as trade duties, subsidies, and investment, and exchange rate regimes have all parastatal marginscan, of course, mitigate or ex- been of critical importance during the 1970s and acerbate the implicit taxation caused by general 1980s. When expansionary monetary and fiscal economic policies. What are the levels of trade du- policies have led to higher inflation at home than ties and subsidies in agriculture? Is agriculture ac- abroad, governments have often failed to adjust tually taxed by sectoral policies, or is it subsidized? exchange rates and have relied instead on increas- Figure 4.1 provides an overview of sectoral trade ing import protection by employing such devices taxes and subsidies in various developing coun- as quotas, exchange controls, and licensing. In tries. These are measured as the difference be- such circumstances, the currency becomes over- tween farmgate prices and border prices at official valued and the bias against agriculture becomes exchange rates, after adjustments for internal stronger because the increased protection usually transport and marketing margins. This procedure accrues to industry. Typically, food imports are ex- is employed because, apart from conventional cluded from restrictive measures in order to keep trade duties and subsidies, the use of quotas and 63 Figure 4.1 Ratio of farmgate prices to border prices for selected commodities of developing countries in the late 1970s and early 1980s Ratio 2.5 Wheat Rice Groundnuts Maize Sugar Beef El Korea 2.0 El Korea El Portugal J Thailand 1.5 Colombia Turkey Malawi Sudan Côte d'Ivoire Turkey ,O Yemen portugaiElEl Mexico El Sudan El 0 Tunisia Yugoslavia Argentina 10 Colombia B 1 Thailand El EgyplEl U Brazil Côte dIvoire Côte divoire Pakistan oColombia J Pakistan Senegal El .'hilippiner Philippine Egypt BangladeshEl Thailan] Pakistan Sudan Zambia ,4rgentina Zambia El Pakistan Yugoslavia ri I dia Portugal Brazilj El Cameroor El Malawi El Argentina India Argentina 0.5 Ghana Senegal0 El Yugoslavia MI Tanzania J Egypt Tanzania 0 gExports Import substitutes 0 Low-income economy 0 Middle-income economy Note: Border prices are converted to domestic currency at official exchange rates. Source: Binswanger and Scandizzo 1983; FAO data. large parastatal marketing margins can contribute ask are: How do governments tax agricultural out- to the sectoral taxes and subsidies that farmers in put and exports, and why do they do it? Some effect face. taxation of export crops involves conventional bor- Export crops. Figure 4.1 indicates that many der taxes or quotas, but frequently taxation is a countries tax export crops, sometimes at very high result of the pricing policies pursued by marketing rates. In Togo, the farm price for coffee was a third agencies in the public sector. This is especially so in of the border price. In Mali, cotton and groundnut Africa, where statutory monopolies, or marketing farmers received half the border prices, and in boards, have traditionally controlled export crops. Cameroon and Ghana cocoa producers received Created in colonial times, marketing boards were less than half. almost always required to use the bulk of their The costs of high agricultural taxation are dis- funds for the benefit of the farming community. cussed later in this chapter. The first questions to But most of them became de facto taxation 64 Ratio 2.5 Tea Cocoa Coffee Tobacco Rubber Cotton 2.0 1.5 El Argentina Bangladesh Thailand 1.0 Malaysia Turkey 0 Malawi Zambia Indonesia Côte dixoire El Thailand Mexico I. Sri Lanka Cameroon Burkina Faso Yemen logo J Tanzania El Turkey o Sudan Côte d'Ivoire 0.5 jJ Sri Lanka Côte d'lvoire El Egypt India Ghana CameroEl Brazil Mali Colombia Cameroon t2. Togo Malawi Togo lanzania 0 agenciesimportant public instruments for ex- years their activities have expanded to cover many tracting resources from export agriculture in sup- other functions, including price stabilization and, port of the postindependence drive to industrial- in some cases, processing. One study indicated ize. High rates of export taxation, of the order of that during the 1970s they in effect taxed producers 50-75 percent, have not been unusual. at rates varying between 17 and 42 percent, de- Marketing boards are also common in other re- pending on the commodity: the highest rates were gions. For example, commodity boards exist by on bananas and coffee. Moreover, domestic prices statute for virtually all the major agricultural ex- were usually at least as variable as export prices, port crops in Jamaica, including sugar, bananas, and in some cases more so. citrus, coconuts, coffee, cocoa, and spices. While The primary reason for export taxes is, of course, the boards were initially required only to assem- to raise revenue for the use of either the marketing ble, package, and export these products, over the boards or the central government. But other rea- 65 Box 4.1 Coffee prices and macroeconomic policies in Colombia Colombian agriculture has a strong trade orientation, higher earnings from coffee increased foreign currency based in large measure on the role of coffee. Agricul- reserves, which were allowed to increase domestic tural exports account for about two-thirds of total ex- money supply and credit, and trade barriers restricting ports, and the agricultural sector has generally been a imports were only partially relaxed. Thus, the real ex- net earner of foreign exchange. Fluctuations in coffee change rate appreciated further. prices pose special problems for macroeconomic man- After coffee prices fell in the early 1980s, the growth agement because it is difficult to assess the duration of in aggregate demand was maintained through higher price increases and the degree of adjustment needed to public expenditures and foreign borrowing, thus sus- deal with temporary changes in external factors. taining the appreciation of the real exchange rate. Coffee prices rose sharply in the second half of the From 1975 to 1984, domestic prices, measured in U.S. 1970s, and this contributed to an appreciation of the dollars at official exchange rates, rose by 100 percent real exchange rate, which reduced the profitability of about twice the rate of external inflation. Growth in noncoffee exports compared with the profitability of noncoffee exports and in noncoffee agricultural pro- nontraded goods and services. A number of interre- duction fell in real terms in the first half of the 1980s. lated factors supported this phenomenon: As the balance of payments deteriorated in the early The increased supply of foreign exchange gener- 1980s, and as it became more difficult to borrow ated by the coffee boom, other things being equal, low- abroad, the role of timely macroeconomic adjustments ered the equilibrium real exchange rate during the began to receive attention. A comprehensive macroec- boom. onomic policy package that addresses the issues of ex- There was a spending effect. The coffee boom led change rate appreciations and fiscal and monetary ex- to higher disposable real incomes, which were spent pansion was recently introduced to provide a sounder partly on noncoffee traded goods and partly on non- basis for the development of the external sector. traded goods. Since the prices of noncoffee traded Since the introduction of these policy improvements, goods are determined mostly by their world prices and another surge in coffee prices has emerged, strength- the official exchange rate, they fell relative to the prices ening the country's balance of payments significantly. of nontraded goods. The challenge of sustaining monetary and price stabil- The policy reaction aggravated the problem. Do- ity in the face of sharply changing coffee prices re- mestic credit and inflation increased significantly. The mains. Sons have also been important in practice. Devel- those on world markets. Marketing agencies have oping countries have tended to impose export been created for this purpose too, sometimes with taxes to take advantage of the monopoly power statutory monopoly powers to ensure that farmers they believe they have in world markets. Many do not sell their products elsewhere. However, po- developing countries have also sought to encour- licing is difficult with food crops, and many age agro-industries by taxing, or restricting by farmers find more lucrative markets. quota, the exports of the agricultural raw materials In Ethiopia, for example, a parastatal marketing they use. Export taxes on cash crops have also agency controls about 30 percent of the total mar- been used to encourage the production of domes- ketable surplus and almost 100 percent of the inter- tic food crops in order to attain self-sufficiency. As regional grain trade from two of the three main will be discussed later, export taxation for these grain-surplus areas. Its farmgate procurement purposes has been very costly in terms of national prices have been far below the import parity incomes and agricultural performance. prices; in 1985, for instance, the import parity Agricultural import substitutes. A few develop- prices (at the official exchange rate) for maize, sor- ing countries have protected agricultural import ghum, and wheat were respectively about 80 per- substitutes to promote self-sufficiencyespecially cent, 50 percent, and 45 percent above the in wheat and dairy and livestock products. In most farmgate prices. And, as shown in Figure 4.1, the cases, however, domestic producers of import sub- maize procurement price in Tanzania was only a stitutes are paid less than the import prices (ad- quarter of the border price. In Cameroon, Ghana, justed for internal marketing costs). In an attempt and Tanzania, rice producers were paid only about to keep urban food prices low, governments often half the border price. This is by no means a phe- try to procure food at prices that are lower than nomenon that occurs in sub-Saharan Africa alone. 66 The tendency to discriminate against domestic Table 4.2 Index of real exchange rates in selected production relative to imports produced by foreign African countries producers has been observed in Egypt, Mexico, (1969-71 = 100) and other developing countries with large urban Country 1973 -75 1978 -80 1981-83 food subsidy programs, although the degree of Cameroon 75 58 80 discrimination against domestic producers and the Côte d'Ivoire 81 56 74 mechanisms used have varied. The costs of this Ethiopia 93 64 67 discrimination are discussed later in this chapter. Ghana 89 23 8 Kenya 88 69 86 It is often thought that if the border prices rele- Malawi 94 85 94 vant to a country are depressed by policies Mali 68 50 66 abroadfor example, due to export subsidiesthe Niger 80 56 74 country concerned should take countervailing Nigeria 76 43 41 measures to keep its domestic prices higher. The Senegal 71 60 85 Sierra Leone 100 90 73 issue, however, is not how border prices are Sudan 76 58 74 formed but what they are likely to be in the future. Tanzania 85 69 51 When countries can indefinitely obtain goods Zambia 90 79 86 more cheaply from abroad than they can produce them, the usual arguments for open trade apply. All sub-Saharan Africa 84 62 69 Thus, if prevailing prices are expected to continue, countervailing actions will hurt rather than help a Note: The real exchange rate is defined as the official exchange rate deflated by the ratio of the domestic consumer price deflator to the country. However, countervailing measures may U.S. consumption deflator. A fall in the index indicates exchange be warranted if the average level of a border price rate appreciation. Data are three-year averages. Source: Kerr (background paper). is likely to increase sharply in the short run be- cause of policy changes abroad. The practice of paying domestic producers of import substitutes from agriculture, the adverse effects of macroeco- and exportables less than border prices is, of nomic policies would have been greater than indi- course, precisely the opposite of countervailing cated by output price trends alone. measures. Suppose, for example, that in one year farmers received only half the border price at the official SECTORAL POLICIES AND REAL EXCHANGE exchange ratethat is, the nominal protection co- RATES. While sectoral pricing and trade policies efficient was 0.5. Suppose also that the govern- frequently exacerbate the general economic bias ment eliminated this difference over a period of against agriculture, their effects cannot be assessed time, during which the exchange rate became in isolation from real exchange rate movements. overvalued by 50 percent because it was not ad- Efforts to improve sectoral policies can easily be justed in line with the excess of domestic inflation outweighed by appreciations in real exchange over inflation abroad. Even though farmers would rates resulting from inappropriate macroeconomic seem better off nominally, in real terms they would policies. This is most easily seen in sub-Saharan actually be as badly off as they were originally. Africa, where, for a variety of reasons, real ex- The trends shown in Table 4.3 show how real change rates appreciated most sharply during the farm incentives have been eroded over time de- 1970s and early 1980s. For the sub-Saharan African spite apparent improvements in nominal terms. countries as a group, real exchange rates appreci- Using official exchange rates, one would infer that ated by 31 percent between 1969-71 and 1981-83, incentives for cereal production in Africa increased as shown in Table 4.2. Exchange rate overvalua- by 51 percent between 1969-71 and 1981-83, or, in tions were particularly large in Ghana, Nigeria, other words, that domestic prices increased signifi- and Tanzania. cantly more than border prices. But when border Since in sub-Saharan Africaas in many other prices are calculated taking the real appreciations areas of the developing worldthe cost of modern into account, the actual increase in incentives was farm inputs imported or produced at home is only only 9 percent. For export crops, incentives nomi- a small fraction of total farm costs, the importance nally increased by about 2 percent. However, they of real exchange rate appreciations with regard to actually declined sharplyby 27 percent. Com- sectoral policies can be seen by looking at trends in pared with the situation in 1969-71, by 1981-83 real farm output prices. Insofar as real labor costs in- incentives to export crops declined in all the coun- creased as a result of the out-migration of labor tries shown in the table. This illustrates that agri- 67 Table 4.3 Index of nominal and real protection coefficients for cereals and export crops in selected African countries, 1972-83 (1969-71 = 100) Cereals Export crops 1972 -83 198 1-83 1972 -83 1981-83 Nominal Real Nominal Real Nominal Real Nominal Real Count rq index index index index index index index index Cameroon 129 90 140 108 83 61 95 75 Côte d'Ivoire 140 98 119 87 92 66 99 71 Ethiopia 73 55 73 49 88 71 101 66 Kenya 115 94 115 98 101 83 98 84 Malawi 85 79 106 100 102 94 106 97 Mali 128 79 177 122 101 83 98 70 Niger 170 119 225 166 82 59 113 84 Nigeria 126 66 160 66 108 60 149 63 Senegal 109 79 104 89 83 60 75 64 Sierra Leone 104 95 184 143 101 93 92 68 Sudan 174 119 229 164 90 63 105 75 Tanzania 127 88 188 95 86 62 103 52 Zambia 107 93 146 125 97 84 93 80 All sub-Saharan Africa 122 89 151 109 93 71 102 73 Note: The nominal index measures the change in the nominal protection coefficient with border prices converted into local currency at official exchange rates. The real index measures the change in the nominal protection coefficient with border prices converted into local currency at real exchange rates. Data for Ghana are not available. Source: Kerr (background paper). cultural reforms need to go hand in hand with gen- response of African farmers, who have to make do eral economic reforms. with a poor infrastructure and imperfect markets, is evident in Niger (see Box 4.2). Counting the costs Empirical work has indicated that the supply re- sponse for all crops taken together is lower than There are many indications that the costs of dis- the responses for individual crops. This is partly to criminating against agricultureeither implicitly be expected: If a government taxes only one crop, through macroeconomic policies or explicitly resources need not be withdrawn from farming al- through sectoral policieshave been large. An im- together. They can be shifted to other crops so that portant reason why this is so is that, contrary to a total farm output does not fall by as much as the long-held belief, farmers in developing countries as in industrial countriesrespond strongly to prices. The crops they grow, the amounts they Table 4.4 Summary of output responses produce, and the technologies they adopt depend to price changes greatly on the policy environment. Percentage change in output There is a large body of evidence that indicates with a 10 percent increase in price that the supply response in developing countries is Other not low. A sample of the numerous estimates made developing Crop Africa countries by researchers of supply responses for individual Wheat 3.1-6.5 1.0-10.0 crops is shown in Table 4.4. The lower end of the Maize 2.3-24.3 1.0-3.0 range shows short-term supply responses, the up- Sorghum 1.0-7.0 1.0-3.6 per end long-term responses. Even in the short Groundnuts 2.4-16.2 1.0-40.5 term, the supply responses are significant, consid- Cotton 2.3-6.7 1.0-16.2 ering the high level of taxation to which farmers Tobacco 4.8-8.2 0.5-10.0 Cocoa 1.5-18.0 1.2-9.5 have often been subjected. Supply responses are Coffee 1.4-15.5 0.8-10.0 widely believed to be especially low in Africa. In Rubber 1.4-9.4 0.4-4.0 fact, however, many studies suggest that they can Palm oil 2.0-8.1 be as high as they are elsewhere. The high supply Source: Askari and Cummings 1976; Scandizzo and Bruce 1980. 68 Box 4.2 Flexible markets in Niger Farmers in low-income economies are commonly as- groundnuts as the country's main agricultural export. sumed to be inflexible, slow to respond to prices, and Production of cowpeas grew by more than 250 percent sluggish in adapting to changing circumstances. This during the 1970s, while the area planted expanded by assumption is wrong or greatly exaggerated. Recent almost 70 percent. Earnings from cowpeas have begun developments in the agricultural sector in Niger tell a to account for a measurable part of farm revenues-4 story, not of passivity and slow response to change, percent in all, but, according to some surveys, as much but, rather, of quick adaptation and adjustment to new as 12 percent for smaller farmers in main producing economic realities. areas. Meanwhile, groundnut sales have shrunk to al- Niger is one of the poorest countries in the world. In most nothing. the 1970s, farmers relied primarily on groundnuts for Cowpeas have a number of advantages over ground- cash income; cotton and livestock were secondary nuts. They can be grown in a variety of soils and allow sources of income. In recent years, farm households farmers to adopt flexible cropping patterns. They are have begun to diversify their sources of income. Stud- more resistant to drought. A large and accessible mar- ies indicate that nonfarm earnings now account for ket exists in Nigeria, whereas groundnut's export mar- more than 20 percent of total household income. Sales kets are mainly in Europe. Cowpeas are traded almost of animals, traditionally the most important source of exclusively on parallel markets, where prices have fre- noncrop income, account for an additional 30 percent. quently been twice as high as the official prices paid by So, half of all agricultural income now comes from SONARA, the state marketing agency. It is hard to sources other than crop production. A census in 1980 know the volume of "unofficial" cowpea exports to revealed that approximately 6 percent of rural Nigerien Nigeria, but annual production is believed to be men are wage earners. An additional 12 percent have 250,000-300,000 tons, while legal exports have never some occupation outside agriculture; for men between amounted to more than 30,000-40,000 tons. the ages of thirty-five and forty-five, the figure is 20 Important points are illustrated by the example of percent. Ninety percent of villages send migrants to Niger. It shows how buoyant open markets can be, work in Nigeria or other countries farther south during even in unlikely places. The growth of cowpeas took the dry season. place almost entirely through parallel markets and in In addition to diversifying out of crop agriculture, the face of public policies that were not encouraging. Niger's farmers have changed their farming patterns. The official price and marketing structure was by- In the 1970s, prices of millet, sorghum, and cowpeas passed. And it shows that change can be extraordi- rose faster than those of groundnuts. At the same narily rapid. In a decade or less, one main cash crop time, groundnut yields were declining, and, after the disappeared and was replaced by another. All of this 1973 drought, farmers wanted to rebuild their food happened primarily in response to market signals, de- stocks. All this encouraged farmers to sow more land spite poor infrastructure, embryonic market informa- to food crops, especially sorghum and cowpeas. The tion, and generally imperfect market conditions. most dramatic result was that cowpeas overtook output of the crop taxed. But estimates of aggre- study showed that, if agricultural prices in Argen- gate farm output responses have typically been of tina between 1950 and 1972 had been 10 percent a short-term nature and have failed to reflect the higher than they in fact were (when the govern- fact that changes in prices have a long-term effect ment was taxing farmers heavily), total agricultural on the intersectoral flow of resources. When such output would have gradually increased to a level effects are taken into account, the aggregate sup- approximately 9 percent higher, on an annual ba- ply becomes price responsive as well. sis, than it actually was over the period. The in- Discrimination against agriculture on a sustained crease in production would have been achieved basis not only reallocates resources within agricul- largely because more capital would have been at- ture but also draws them out of it. As labor and tracted into agriculture and technical improve- capital move out and technical progress slows, the ments would have been made. Box 4.3 on Argen- long-term losses can be large: tina discusses how inappropriate macroeconomic The International Food Policy Research Insti- and sectoral policies led to a large reduction in ag- tute (IFPRI) studied the evolution of the Argentine ricultural output. A similar simulation for the Chil- and Chilean economies and the effects of pricing ean economy during the period 1960-82 indicated and exchange rate policies on agriculture. The an even greater supply response: the level of out- 69 put would have eventually become 20 percent returns to investment, discourage technical higher each year than otherwise in response to a 10 progress, and encourage farmers to leave the land. percent sustained increase in agricultural prices. Evidence about the long-term effects of price Sustained taxation of farming can thus lower the changes on farming can also be obtained by exam- Box 4.3 Trade policies and agricultural performance: the case of Argentina Argentina has ideal farming conditions and is one of During periods of high government spending, de- the largest grain exporters in the world. It has had a mand for imports rose and domestic prices for pro- long history of agricultural growth. Between 1965 and tected imports jumped sharply, turning the internal 1983, however, agricultural growth averaged only 0.8 terms of trade against agriculture (see Box figure 4.3). percent a year, compared with 1.9 percent a year dur- By simulating what would have happened in the ab- ing 1950-64 and about 2.6 percent before World War II. sence of these policies, the study indicated that: Agriculture's recent poor performance reflected poor Real prices of all agricultural products would have incentives. The internal terms of trade were deliber- been higher by about 38 percent a year on average ately turned against the agricultural sector through a during 1960-83. These prices were depressed not only combination of export taxes, tariffs, restrictions on im- because of import control and public spending poli- ports of industrial goods, and exchange controls which cies, as described above, but also because of heavy led to an overvalued currency. Argentina's policies taxation of agricultural exports. These exports, which grew out of a perception that its exports, which were are an important component of the sector, were taxed primarily agricultural, were facing declining real prices at an average annual rate of about 44 percent during on world markets and therefore Argentina needed to the period. diversify its economy by encouraging industry. The annual value of agricultural output would Moreover, in the 1950s and 1960s, the notion that have become 33 percent higher by 1983 had the agricul- agricultural output did not respond significantly to tural prices not been depressed by 38 percent as a price changes was an essential part of the debate on result of the sectoral and macroeconomic policies. growth, inflation, and distribution in the Argentine economy. Policymakers argued that taxing agriculture to support industries that made import substitutes Box figure 4.3 Implicit and collected tariff rates and budget deficits in Argentina, 1960-82 would not result in big losses in farm output; similarly, they thought that increasing agricultural prices by re- Percent ducing export taxes or by devaluing the currency 240 would increase the budget deficit, accelerate inflation, and penalize poor consumers without significantly af- fecting agricultural supply. Indeed, inflation itself was considered to be structural, that is, a reflection of the 180 food or foreign exchange shortages that resulted when industrialization pushed up income and increased do- mestic demand for food. These views have been changing since the 1960s, and, by now, agricultural 120 supply responses have been shown to be strong in Argentina. A recent study of the Argentine economy examined the combined impact of exchange rate, fiscal, and com- 60 mercial policies on the agricultural sector. Besides esti- mating the level of taxation on agriculture created by the above policies, it also provided insights into the 0 interrelationships among various macroeconomic poli- cies. For example, it showed that, since physical con- 1960 1965 1970 [975 1980 trols on imports were the primary instruments used to Implicit tariff protect industry, fiscal policy strongly influenced the Collected tariff degree to which Argentina's trade policy adversely af- Budget deficit as a percentage of GDP fected agriculture. While the restrictions remained for the most part constant between 1960 and 1983, domes- Note: An implicit tariff of 100 percent indicates that the domestic price tic prices for protected imports deviated widely from is double the corresponding international price. Source: Cavallo (background paper). world prices when macroeconomic policies changed. 70 Figure 4.2 Indices of real exchange rates and agricultural exports in Ghana, Nigeria, Brazil, and Chile, 1961-84 Index (1975 = 100) Index (1975 = 100) Ghana 150 Brazil 160 120 120 80 90 60 200 Nigeria 130 Chile 100 150 100 50 40 1961 1965 1970 1975 1980 1984 1961 1965 1970 1975 1980 1984 ining what happened when the real exchange rate all developing countries and by more than one per- changed sharply and affected the real prices of centage point in sub-Saharan Africa. The results farm goods received by producers. Two countries for Africa not only confirm the fact that supply whose real exchange rates appreciated sharply responses are high in that region, but also show Ghana and Nigeriacan be compared with two that exports are sensitive to exchange rate changes countries whose real exchange rates depre- when there is the chance to sell on parallel mar- ciatedBrazil and Chile. Figure 4.2 shows a close kets. Correlations between real exchange rate connection between changes in the real exchange movements and agricultural output have also been rates in these countries and the level of their agri- similarly close in many cases. The effects of real cultural exports. Detailed econometric studies exchange rate movements on agriculture in Nige- show this is true more widely. On average, a per- ria and Indonesia are discussed in Box 4.4, which centage point fall in the real exchange rate reduces compares the countries' different reactions to the agricultural exports by 0.6-0.8 percentage point in oil booms of the 1970s. 71 The emergence of parallel markets, most sig- farmers sell export crops unofficially, and it may nificaritly in Africa, indicates that the taxes which end up worse off than it would have been had marketing agencies have tried to impose and the taxes been lower and the real exchange rate appro- large exchange rate overvaluations have gone well priate. Sierra Leone suffered large foreign ex- beyond what is enforceable. The main loser is the change losses because exports of coffee, cocoa, government itself. It loses tax revenues when palm kernels, and rice were smuggled out through Box 4.4 Oil and agriculture: Nigeria and Indonesia The oil boom of the 1970s and early 1980s proved a declined at the rate of 5.7 percent a year and 7.1 per- blessing and a curse for many oil-exporting countries. cent a year, respectively. Oil revenues raised the standard of living, widened job Several policy differences between Nigeria and Indo- opportunities, and increased the policy options avail- nesia explain these divergent results. The real ex- able to governments. But they also altered the struc- change rate appreciated in both Nigeria and Indonesia ture of incentives in the economy, raised expectations, by about 30 percent between 1970-72 and 1974-78. and produced rapid and often destabilizing changes. Thereafter, Indonesia kept its real exchange rate Agriculture, especially, was affected by these changes. steady. It tightened its monetary and fiscal policies and Oil-exporting countries commonly experienced de- between November 1978 and March 1983 devalued the clines in the rate of growth of their agricultural sectors. rupiah by more than 50 percent against the dollar. In Higher incomes led to an increase in the price of non- contrast, Nigeria resisted any devaluation of the naira, tradable goods at the expense of tradable goods such despite rapid appreciation of the real exchange rate. as crops. Farmers abandoned the land for more lucra- Nigeria also borrowed heavily on the basis of future oil tive employment in the booming construction indus- earnings. By 1982 the real exchange rate was more than try. The ability to pay for larger imports of food and double its value in 1970-72. other agricultural products, which were then sold at The two countries also differed in their public spend- subsidized prices, lowered the relative profitability of ing on agriculture. The bulk of Nigeria's increased agriculture. The force of these changing incentives has public expenditure was allocated to primary education, been strongly influenced by government policies and transport, and construction. Indonesia distributed the structure of the economy. Indonesia and Nigeria, spending more equally among physical infrastructure, two middle-income economies that had more than 40 education, capital-intensive industry, and agricultural percent of GDP originating in agriculture before the oil development, especially in rice. price increase of 1973, provide a revealing contrast. In recent years, Nigeria has made efforts to increase In Nigeria, the oil boom led to a severe disruption of incentives and boost investment in agricultural infra- the agricultural economy and a large exodus to the structure and extension services. Yet output has con- cities. Between 1970 and 1982, annual production of tinued to stagnate. Reversing agriculture's long de- Nigeria's principal cash crops fell sharply: cocoa by 43 cline will require a sustained improvement in real farm percent, rubber by 29 percent, cotton by 65 percent, prices and better exchange rates as well as continued and groundnuts by 64 percent. The share of agricul- and improved agricultural support programs. tural imports in total imports increased from about 3 Box table 4.4 Real exchange rate and agricultural percent in the late 1960s to about 7 percent in the early performance in Nigeria and Indonesia, selected years, 1980s. Indonesia, all but unique among the oil- 1965-83 exporting developing countries with large popula- Index of real exchange rate tions, succeeded in avoiding serious disruption to its agriculture. Though agricultural growth slowed in the Year Nigeria Indonesia mid-1970s, by the late 1970s it had recovered to pre- 1970-72 100.0 100.0 vious levels (see Box table 4.4). Rice production grew 1974-78 76.3 74.7 by 4.2 percent a year from 1968 to 1978 and by 6.7 1982-83 47.8 71.3 percent from 1978 to 1984, largely because of rapid Growth of agriculture increases in rice yields. The share of agricultural im- (average annual percentage change) ports in total imports remained unchanged at about 1.0 Agricultural out put Agricultural exports percent. Indonesia increased its agricultural exports both as a proportion of developing countries' agricul- Year Nigeria Indonesia Nigeria Indonesia tural exports and as a proportion of world agricultural 1965-73 2.8 4.8 -4.0 1.9 exports. The rates of increase were 2.0 percent a year 1974-78 -2.5 2.8 -4.2 5.3 and 0.5 percent a year, respectively, between 1965 and 1973-83 -1.9 3.7 -7.9 3.1 1983. Nigeria's corresponding export market shares Source: Pinto (background paper). 72 neighboring Liberia. The experience with parallel exports of jute; and Indonesia and Malaysia ac- markets also reflects the changes that farmers counted for 30 and 40 percent of world exports of make to their pattern of production when crops are rubber, respectively. All these countries, as well as discriminated against on official markets. In Tanza- Brazil (coffee) and Egypt (long-staple cotton), have nia, higher food prices on the parallel market re- tried to keep world prices high by restricting sup- sulted in a decline in the production of export ply. crops (such as cotton, tobacco, and pyrethrum) But the gains from exploiting monopoly power when farmers switched to growing maize instead. have usually been limited because foreign con- The losses in foreign exchange contributed to fur- sumers have found alternative supplies or substi- ther overvaluation of the currency, which de- tutes and because domestic producers have had pressed export production still more (see Box 4.5). lower incentives to invest in new technologies. Countries that instituted heavy export taxes have THE COSTS OF MISJUDGING MONOPOLY POWER AND seen their market shares usurped by others with COMPARATIVE ADVANTAGE. Perhaps the most strik- more favorable policies toward producers. Ghana ing evidence of the cost of export taxation can be and Nigeria have lost world market shares in cocoa found in the reduced shares of many developing (see Table 4.5). In the early 1960s, Nigeria and countries in international trade. Many developing Zaire exported more palm oil than the main Asian countries tax exports of raw materials and bever- producers; by the early 1980s the Asian exporters ages in the hope of benefiting from their perceived had captured more than 90 percent of the world monopoly power in trade. The less responsive the market. Egypt's share of the world cotton market world demand is to prices and the higher a coun- in the early 1960s had been cut in half by the early try's share in world markets, the greater the coun- 1980s. Sri Lanka has seen its share of the world tea try's monopoly power. Quite a few developing market fall from one-third in the early 1960s to countries have had large enough market shares to one-fifth in the early 1980s. In contrast, Kenya, exercise some monopoly power. In the early 1960s, which encouraged tea producers, has seen its Burma and Thailand each accounted for about one- share increase from less than 3 percent to more fifth of world exports in rice; India and Sri Lanka than 9 percent during the same period. Box 4.6 each accounted for about one-third of world tea discusses these trends. exports; Nigeria and Zaire each accounted for Because prices of food and raw materials tend to about one-quarter of world exports of palm oil; decline in real terms over the very long term, many Ghana accounted for two-fifths of world cocoa ex- believe that investment in agriculture-especially ports; Bangladesh had about four-fifths of world in primary products-is a losing proposition and Table 4.5 Growth in output and exports, and the export market shares of cocoa and palm oil in selected developing countries, 1961-84 Average annual Average annual Export market shares Commodity ,percentage change percentage change and country moutput, 1961-84 in exports, 1961-84 1961-63 1982-84 Cocoa Africa 0.1 -0.6 80.0 64.1 Cameroon 1.5 0.5 6.8 6.9 Côte d'Ivoire 7.3 6.0 9.3 26.3 Ghana -3.7 -4.2 40.1 14.4 Nigeria -2.0 -1.9 18.0 11.2 Latin America 3.2 0.9 16.7 18.5 Brazil 4.5 2.7 7.3 10.9 Ecuador 2.5 2.2 3.2 2.6 Palm oil Africa 1.8 -6.4 55.8 1.9 Nigeria 1.4 -23.6 23.3 0.2 Zaire -1.8 -15.5 25.1 0.1 Asia 15.0 14.8 41.8 95.0 Indonesia 9.7 6.2 18.4 8.2 Malaysia 19.0 18.0 17.9 70.6 73 Box 4.5 Agricultural prices and marketing in Tanzania In Tanzania, the government controls most aspects of agricultural marketing. Marketing cooperatives re- Box figure 4.5B Ratios of producer prices to border prices in Tanzania, 1970-84 sponsible to national crop marketing boards began to take over from private traders during the 1960s. Be- Percent tween 1973 and 1976, ten state agencies were put in 100 charge of buying, processing, and marketing twenty- seven widely grown crops and fifteen minor ones. The marketed surplus of most of these crops could be sold 80 through state channels only. The government fixed the producer prices before the start of each season. Prices did not take into account differences in transport and 60 were often the same throughout the country. Some of the effects can be seen in Box figure 4.5A. Real prices for farmers fluctuated as fixed nominal 40 prices were adjusted in unpredictable jumps every few years; thus, not even the aim of stabilizing prices was achieved. But, worse for farmers, average real pro- 20 ducer prices declined steeply between 1970 and 1975, recovered somewhat in 1975-78, and have continued to fall ever since. By 1984 the weighted average of offi- 0 cial producer prices was 46 percent below its 1970 level 1970 1972 1974 1976 1978 1980 1982 1984 o Ratio calculated using official exchange rates Box figure 4.SA Agricultural prices in Tanzania, O The same ratio adjusted for overvaluation of the currency 1970-84 relative to the official exchange rate in 1970 Note: Prices are a weighted average of ten export crops. Index (1970 = 100) Source: Ellis (background paper). 200 in real terms; prices for export crops were almost half their 1970 levels, even though the weighted average of 160 A world prices for Tanzania's crops at official exchange rates was 17 percent higher in real terms in 1980 than it had been in 1970. 120 A Rising export taxes and increased marketing costs reduced the farmers' share of the final sales value of export crops from 70 percent to 41 percent in 1980, although it has since recovered (see Box figure 4.5B). But the bias against export crops has been much more severe than is indicated when measured at official ex- change rates. Correcting for the overvaluation of the currency during this period, the bias was much stronger, as is also shown in Box figure 4.5B. In reality, 40 the bias against exports was even greater, because pro- 1970 1975 1980 1984 ducers of food crops could sell their output on parallel markets, where prices were higher than official levels, Real producer price for domestic crops but producers of export crops could sell only to the - Real producer price for export crops government. Real border price for exports The output of some export crops, notably cashews, Source: Ellis (background paper). cotton, and pyrethrum, fell drastically in the 1970s. Ambitious development programs for tea and tobacco 74 failed to reach their targets. Coffee production also Box table 4.5 Official and unofficial prices for stagnated, because farmers had little incentive to re- selected crops in thirteen villages in Tanzania, place old trees. By 1984 the tonnage of export crops 1979-81 marketed by the marketing boards was 30 percent less (Tanzanian shillings per kilogram) than it had been in 1970. Official price Parallel price At first sight, it seems the boards had more success Crop 1979-80 1980-81 1979-80 1980-81 with domestic staples. In 1978-79, the marketing chan- nels sold more than twice as much staple grains (par- Maize 1.00 1.00 3.08 4.98 ticularly maize) as they had in 1970 (see Box figure Paddy rice 1.50 1.75 2.31 4.23 4.5C). This reflected the good harvests that followed Cassava 0.65 0.65 1.99 2.90 droughts in 1974-75 and an increase in real producer Sorghum 1.00 1.00 2.96 4.68 Millet 2.00 1.50 4.73 6.95 prices as world market prices rose (though the absolute level of the producer price for maize was still less than Source: Raswant (background paper). one-third of the import price). Official marketing of drought-resistant crops (cassava, sorghum, and millet) in 1979 was more than eight times the 1970 level, and official prices (see Box table 4.5). By 1984 the amount of for oilseeds (groundnuts, sesame, sunflower, and cas- maize marketed through official channels was less tor) the level in 1980 was some 30 percent greater than than one-third of its 1979 peak; official channels in 1984 in 1970. But problems emerged. As real producer handled less than one-third of the average annual prices for domestic crops declined sharply, the official amount of rice they had sold in the 1970s. Consider- marketing boards became increasingly dependent on able diversion to parallel markets has also occurred imports; farmers shifted to parallel markets, where with the drought-resistant and oilseed crops. Only in prices, though unstable, were many times higher than the one major crop in Tanzania where the producer price has generally been maintained above the import pricewheathas state marketing been more stable. In recent years Tanzania has tried to reform its sys- Box figure 4.5C Marketed output of commodity groups tem by relying more on village cooperatives. People in Tanzania, 1970-84 may now transport up to 500 kilograms (rather than 30 kilograms) of grain without a permit; anyone with for- Thousands of tons eign exchange can use it to import goods; above all, the 450 state marketing boards will control the prices of only 400 eighteen main crops, not the forty or more regulated a few years ago. Controls on the retail price of maize flour, the main food staple, were lifted in 1984. 300 Relaxing controls on grain marketing may have been the single most important factor contributing to the recent increases in grain supplies and to the 50 percent 200 real fall in food prices in 1985, but the success of Tanza- nia's reforms is far from ensured. Much will depend on whether the cooperatives can be set up quickly and 100 whether they will be allowed to respond to farmers' demands. Few improvements in agricultural produc- tion are likely if the cooperatives turn out to be merely 0 another form of monopoly. Much depends, too, on the 1970 1975 1980 1984 flexibility of marketing arrangements for major export crops; on whether the official prices are recognized for Export commodities what they tend to be in practiceminimum floor prices Staple commodities rather than fixed procurement prices; on whether the Drought-resistant commodities high costs of public sector marketing can be reduced; - Oilseeds and, finally, on whether the government can reverse the substantial appreciation of the currency that oc- Source: Ellis (background paper). curred between 1979 and 1984. 75 Box 4.6 Export taxation and monopoly power Countries with a significant share of an export market in Côte d'Ivoire led to extensive smuggling of Ghana- can affect world prices, at least for a short period of ian cocoa. time. But attempts to tax foreigners may easily turn into excessive taxation of domestic farmers. The result Tea in Sri Lanka is often stagnation or decline in export crops. Sri Lanka had considerable scope for influencing world prices for tea in the early 1960s. In 1961-63 it accounted Cocoa in Ghana for 33 percent of world tea exports, and Sri Lankan tea Cocoa pricing policies in Ghana provide one example. had a long-established niche in the market. Kenya then Since 1950, the Cocoa Marketing Board has had a mo- accounted for only 2.6 percent of world exports. While nopoly on buying, transporting, and exporting cocoa. other factors have also been important, the two coun- The board used its monopoly power to raise significant tries followed very divergent pricing policies. In Sri tax revenue from export sales. At the same time, the Lanka, average tax rates exceeded 50 percent in the late government kept the value of the currency high: in 1970s; they have averaged 35 percent over the past 1979 the real exchange rate was estimated to have been decade. In Kenya, taxation was much more moderate. 347 percent higher than it had been in 1972. The com- Box table 4.6B compares tax rates in 1985 at a range of bined effect was to raise the effective export duty from world prices. Sri Lanka's tax captures most of the sur- plus above an estimated cost of production. In con- trast, most of the returns remain with the producer in Box table 4.6A Relative price incentives for cocoa Kenya. When tea costs $2.40 a kilogram, tax rates in Sri farmers in Ghana, Togo, and Côte d'Ivoire, 1965-82 Lanka are ten times higher than in Kenya. At $3.60 a Ratio of Ratio of kilogram, they are still more than three times as high. Ghana price to Ghana price to By 1980-82, Sri Lanka's share of world markets had Year Togo price Côte d Ivoire price fallen to 19 percent while Kenya's share had more than 1965 0.97 0.97 tripled to 9 percent. 1970 0.56 0.60 1975 0.74 0.48 1980 0.23 0.18 Box table 4.6B Tax rates on tea in Kenya and 1981 0.36 0.26 Sri Lanka, 1985 1982 0.40 0.30 (percent) Kenya Sri Lanka Fob, price a high 54.3 percent in the last half of the 1960s to 88.9 (dollars per Average Marginal Average Marginal percent in the last half of the 1970s. Producer prices in kilogram) tax rate tax rate tax rate tax rate Ghana were far below levels in competing West Afri- 1.20 0.00 0 22.4 0 can countries (see Box table 4.6A). Ghana's share of 1.80 2.83 10 14.9 0 export markets slumped from 40 percent in 1961-63 to 2.40 2.59 15 27.7 50 18 percent in 1980-82; Togo's market share grew 3.00 8.17 20 32.2 50 slightly; that of Côte d'Ivoire rose from 9 percent in 3.60 10.66 25 35.2 50 4.20 13.10 30 37.3 50 1961-63 to 29 percent in 1980-82. This was greater than 4.80 14.92 25 38.9 50 the increase in its exportable surplus: the higher prices that planners should shift their attention else- sources elsewhere. Such a shift should occur where. This view is misleading for several reasons. naturally, with market prices signaling the eco- First, long-term declines in real commodity prices nomic merits or demerits of further investments. It have coexisted with, indeed have been partially is inappropriate and self-defeating for policymak- caused by, technical progress in developing coun- ers to force the process by imposing excessive tries. Countries that have promoted technical taxes on exports or by other means. progress-for example, Thailand in rubber and Malaysia in palm oil-continue to find specializa- THE COSTS OF PROMOTING AGRO-INDUSTR!E5. tion in primary commodity exports profitable. Sec- Developing countries sometimes subsidize agro- ond, if despite technical progress, economic rates industrial exports to offset escalating tariffs in in- of return to investments in agricultural commodi- dustrial countries (see Chapter 6). Such subsidies ties gradually fall to unacceptable levels, the econ- may be given directly, in the form of subsidized omies concerned should at that time shift re- credit to processors, or indirectly, by restraining 76 domestic raw material costs through export quotas Figure 4.3 Production, consumption, and or taxes. Systematic taxation of raw materials to imports of cereals in sub-Saharan Africa, ensure the financial viability of processing indus- 1965-84 tries has been common in many countries, includ- ing Ghana and Tanzania. Although the taxation of Kilograms 150 Per capita production and consumption raw material exports may reduce the financial costs of processing, the true costs of subsidies are borne Consumption by the developing countries themselves. The growth of the soybean processing industry in Brazil illustrates how subsidies for agro- industries can become counterproductive. The ex- pansion of soybean output in Brazil is a remarkable story: starting from a very small base in the late 130 Yv 1960s, soybean production expanded so rapidly Production that by the early 1980s Brazil was producing nearly 110 19 percent of world output. The expansion of soy- bean processing was even more rapid. Prior to the 1970s, soybean processing was composed of many small and medium-size plants; the total processing capacity was 800,000 tons. By 1980, processing ca- 90 pacity had increased to 20 million tons, or about 26 Per capita net imports 160 percent of domestic soybean production. Brazil began importing soybeans to process at home. In 1984, more than 63 percent of soybean production 20 was exported, of which only 6 percent was in raw A form. This growth in processing capacity was induced Wheat and flour by a policy, initiated in the early 1970s, of provid- 12 ing large credit subsidies, imposing controls and taxes on raw soybean exports, prohibiting imports Rice of soybean oil and meal, and giving export subsi- dies to processors. During the period 1976 to 1984, the margins between the border prices of oil and meal and raw soybeans were insufficient to cover 0 processing costs. If raw soybean inputs are valued at what they could have earned in the world mar- 4 Major coarse grains ket, processing actually resulted in foreign ex- 1965 1970 1975 1980 1984 change losses. As a result of the encouragement Note: Consumption is calculated as production plus net imports. given by the government to the processing indus- Source: FAO. try, the economy lost about $1.7 billion between 1976 and 1984. Without the direct and indirect sub- sidies, the growth of processing capacity would have been smaller, because the true costs of pro- cessing and the risks of adverse world price move- mentioned earlier, systematic protection of import ments would have been perceived by the private substitutes has not been common. What has been sector. much more common is discrimination against do- mestic producers through low procurement prices THE COSTS OF SELF-SUFFICIENCY. Developing and through macroeconomic policies. The strong countries proclaim self-sufficiency in food as a cru- bias against agriculture has increased sub-Saharan cial national objective. Various means can be used Africa's dependence on imports of food, particu- to attain itfor example, import barriers, public larly wheat and rice (Figure 4.3). investments to support food production, and taxa- Paradoxically, Africa's food problems are often tion of crops that compete with food production. ascribed to an overemphasis on nonfood crops. All of these means have been used, although, as But data for the periods 1960-70 and 1970-82 paint 77 a different picture. Countries that experienced sat- production slow down while the rate of growth of isfactory growth of one type of crop also experi- nonfood production accelerated. enced satisfactory growth of the other. In twenty- Export and food crops complement each other five out of thirty-eight African countries, the rate even more as farmers shift from traditional to mod- of growth of both food and nonfood production ern practices. Modern agriculture requires more fell in 1970-82 compared with the 1960s. In six tradable inputs. In most of Africa, as well as in countries both growth rates increased; in only five many developing countries elsewhere, these in- did the rate of growth of food production increase puts must be imported. One obvious way of earn- while that of nonfood production fell. And in only ing the foreign exchange needed is to expand agri- two other countriesKenya and Malawi, which cultural exports. are self-sufficient in fooddid the growth of food It is likely that, had they followed the right type Box 4.7 Food self-sufficiency in Asia Most Asian countries cite self-sufficiency in food as an on fertilizers, the economic cost would be about Rs79 a important policy aim, and many have achieved or are bushel. The largest subsidy, however, is on irrigation approaching it. India had a large surplus of wheat in water. In the areas of the Mahaweli irrigation system 1985. Indonesia achieved self-sufficiency in rice in 1984 where costs are highest, development costs are almost and 1985. Bangladesh greatly reduced cereal imports in Rs400,000 an acre (about $17,000). The Costs are about the 1980s. China shifted from being a major importer half in the median-cost areas. Assuming yields of 160 of food grains in the 1970s to being a surplus producer bushels per double-cropped acre and an opportunity in the 1980s. These achievements reflect the efficient cost of 10 percent, the economic cost of rice would be adoption of new crop varieties and techniques by about Rs250 a bushel in the high-cost areas and about Asian farmers and improved policies for agriculture. Rs165 a bushel in the median areas. In Burma, by com- More than 22 million hectares were brought under parison, farmers supply a higher grade of paddy at irrigation in South and Southeast Asia between 1966 Rs25 a bushel. Even if the significant subsidies on fer- and 1982, which raised the proportion of total irrigated tilizers in Burma are taken into account and a part of agricultural land from about 20 percent to more than 28 the costs of the Mahaweli scheme is allocated to activi- percent. By the late 1970s, modern rice varieties cov- ties other than rice growing, there remains a very large ered 80 percent of the cultivated area in China, more gap between marginal costs of production in Sri Lanka than 70 percent of the cultivated land in the Philip- and those in Burma. pines and Sri Lanka, and more than 50 percent of such Countries often fail to capture the potential gains land in Indonesia and Pakistan. Modern varieties of from trade for a complex array of reasons. First, coun- wheat expanded to cover two-thirds of the total wheat tries may not be able to import at prices which reflect area in India. Between 1966 and 1982, total fertilizer marginal economic costs of production in low-cost ex- consumption increased more than sixfold in Southeast porting countries. Exports in Burma, for instance, are a Asia and more than fourfold in South Asia. state monopoly, and the export price is well above the But such successes do not necessarily mean that self- economic costs of production, processing, and market- sufficiency is a desirable policy. Substantial gains from ing. Thailand has often raised its export tax on rice in trade can be forgone in its pursuit. Such losses were periods of high world prices, such as 1973-75. Such evident in China when each province aimed to become policies have encouraged import substitution in coun- self-sufficient in food grains. The same losses can occur tries with trade deficits. Second, and conversely, im- if a country restricts trade in world markets. Take the port restrictions in importing countries discourage in- case of Sri Lanka, where research spending, pricing vestments in rice by exporters. Subsidies on rice policies, input subsidies, and investment in irrigation exports by industrial countries also discourage higher have all been geared to achieving self-sufficiency in production in low-cost countries. Third, the high cost rice. Many components of the effort were appropriate, of self-sufficiency has often been underwritten by but, from an economic point of view, the policies may grants or concessionary loans from donors. Taken in have been pushed too far. The government's support isolation, many components of each country's policies price for producers of paddy, which is set to provide may have been logical. Taken together, however, they farmers with a reasonable rate of return, was Rs65 a add up to a bias against a well-integrated world agri- bushel in 1983. This price is far below the economic culture capable of capturing the full benefits from cost of producing rice in some areas, because of input trade. subsidies. Adjusting only for the subsidies provided 78 Box 4.8 Agricultural pricing policies and the environment: the case of Haiti With a per capita GNP of about $370 in 1985, Haiti is creasingly divorced from the comparative advantage the poorest country in the Western Hemisphere. It is the country has in the production of coffee and cocoa also one of the most densely populated, with 5.3 mil- relative to maize, sorghum, and rice. Domestic prices lion people in a total area of 2,800 square kilometers. of these staples have been supported above parity by Much of the country is mountainous. Fifty percent of quantitative import restrictions. At the same time, the the land area has a slope greater than 40 degrees and is government has continued its traditional policy of tax- ecologically suitable for forest cover only. The other ing coffee and cocoa exports. Over the past five years, half is under cultivation and natural pasture. Farm size the ratios of domestic farmgate prices to border prices is becoming regressive; of the 600,000 farm holdings, at official exchange rates have been of the order of 0.5 more than 65 percent have less than one hectare. Satis- for coffee and 1.3 for maize, sorghum, and rice. The fying domestic food requirements is absorbing increas- deterioration in the real value of the Haitian gourde ing areas of land, at the expense of cash crops, particu- relative to the U.S. dollar means that the staples have larly coffee and cocoa. Intercropping by smallholders been less protected, and coffee has been taxed more using traditional methods, which require few modern heavily, than it appears. inputs, is widespread. The taxation of coffee and other cash crops has ad- Mounting population pressures, felling of forests for versely affected income growth and its distribution, fuel and construction, and increased planting of food nutrition, and the preservation of nonrenewable re- crops in hilly areas have led to extensive soil erosion. sources. Soil erosion has reached calamitous propor- Other consequences of these pressures are the decreas- tions. Around 15,000 hectares of cultivated land is be- ing viability of farms, declining per capita production, ing lost to erosion each year. Almost 1.1 million increasing rural poverty, malnutrition, and rural-urban hectares have been denuded of soil and have become and international migration. essentially wilderness, with little or no vegetation. The causes of these developments are complex. They Coffee trees, which are ecologically suited to the previ- involve both traditional nonmarket phenomena and ously forested hillsides, are being replaced by maize the government's agricultural pricing and trade poli- and sorghum, which do not bind the soil as well. cies. Peasant farmers' incentives to produce have been A broadly based package of social and economic severely constrained by a pervasive structure of infor- measures will be necessary if investment, production, mal, often feudalistic, authority and taxes, as well as and resource conservation are to be stimulated in rural by insecurity of tenure and the absence of effective Haiti. Reforms of agricultural pricing and trade policies technical support from government. Larger holdings would have to be an integral component of any such have been characterized by absentee ownership. package if long-term growth in the sector is to be at- Over the past fifteen years, the government's agri- tained. cultural pricing and trade policies have become in- of pricing policies, many developing countries erosion of arable land in sub-Saharan Africa. Al- would have progressed further toward self- though it is not often realized, the pricing policies sufficiency than they in fact have. The key issue, that developing countries follow can be important however, is not self-sufficiency, but comparative from this point of view also. When farming be- advantage. If a country can use its resources better comes unprofitable, farmers lose the incentive to on exportswhether agricultural or notthere is care for their land. Equally important, different little reason for wasting resources to pursue self- crops have different effects on soil conservation, sufficiency in food. In Chile, for example, both ag- and pricing policies may exacerbate soil erosion by ricultural exports and imports increased dramati- inducing farmers to choose the wrong crops. In cally following the realignment of prices in the Haiti, for example, coffee and other tree crops bind early 1970s (see Chapter 5). But, as discussed in the soil on hillsides better than field crops do. The Box 4.7, self-sufficiency remains a popular noneco- taxation of coffee relative to field crops has had the nomic objective, and some countries have been unfortunate side effect of increasing soil erosion. willing to incur large costs to attain it. This is discussed in Box 4.8. THE COSTS TO THE ENVIRONMENT. Protection of INTERSECTORAL LINKAGES. These illustrations of the environment is a task that has recently at- the bias against agriculture and its costs have fo- tracted much attention, especially because of the cused mainly on agriculture. But the question may 79 be raised as to whether the sacrifices in agricultural World War I. Substantial transfers of capital and output are offset by growth elsewhere. The effects labor from agriculture to the rest of the economy of wrong policies in one sector are never confined contributed much to Japan's industrial develop- to that sector alone. The experience of decades ment, but those transfers came about as agricul- suggests that a healthy agricultural sector is critical tural productivity increased. The Japanese experi- to national growth. Taxing agriculture to force re- ence has special relevance to the developing sources to industry will retard agricultural growth, countries because it was achieved by farmers with lower domestic food and raw material supplies to only small plots of land and did not involve manip- industry, and reduce demand for industrial prod- ulation of the terms of trade against agriculture ucts. This will harm agricultural and industrial (see Box 4.9). prospects in the long run. With some exceptions, The industrialization of the fast-growing East such as the oil and mineral exporters, countries Asian economies follows to a large extent the Japa- with low agricultural growth have low industrial nese pattern of rapid agricultural growth support- growth and countries with high agricultural ing the drive toward industrial growth. The fact growth have high industrial growth (see Figure that agricultural and industrial growth comple- 4.4). Agriculture's intimate connections with ment each other is also evident from recent studies growth and the wider economy mean that the on developing countries. In India, a 1.0 percentage costs of discrimination against agriculture are not point increase in the agricultural growth rate is cor- borne by farming alone. related with an increase in industrial growth of 0.5 The role of agricultural growth in industrializa- percentage point and in national income of around tion is well documented in England, where the In- 0.7 percentage point. Agriculture is linked to in- dustrial Revolution began: the story was the same dustry through rural expenditure on manufac- in Japan between the Meiji Restoration in 1868 and tures. Increases in agricultural output raise house- hold and government incomes and the demand for consumer goods. Although per capita incomes in India are higher in towns than in the countryside, Figure 4.4 Average annual growth the absolute size of the market for manufactured in agriculture and industry in developing goods is larger in rural areas. Moreover, villagers countries, 1973-84 spend so much of any extra income on manufac- Industrial growth rate (percent) tures that an increase in agricultural income gener- 10 ates substantial demand for industrial goods. Studies in other countries confirm how important this connection is. In Nueva Ciga province in the Philippines, a 1 percent increase in agricultural in- come generates a I to 2 percent increase in value added in most sectors of the local nonfarm econ- omy. In the Muda district of Malayasia, every $1.00 increase in agricultural output indirectly adds $0.80 in value added to the rest of the village econ- omy. The role of agriculture envisaged in the strategy of industrialization behind high protective barriers ignores the lessons of history. While it is true that the share of agriculture in national income declines in the long run, transfers of resources from agricul- 0 ture should come about naturally through growth . in its productivity rather than through highly dis- criminatory policies against agriculture. 2 1 1 3 5 7 Agriculture as a source of tax revenues Agricultural growth rate (percent) In many developing countries the agricultural sec- Low-income economy tor is the largest tax base, and some taxation is Middle-income economy unavoidable for financing public expenditures in 80 Box 4.9 Agricultural taxation in Japan The contribution of agriculture to the Japanese eco- been true during the first quarter century of Japanese nomic miracle is a test case for the role of agriculture in development, when tax transfers were largest. The development. On the face of it, agriculture in Japan public sector may have played an important role before displayed many of the characteristics shown in today's the private sector was able to allocate private savings developing countries. For most of the past century, its among different sectors of the economy. growth rate was less than 2 percent a year, except after The nature of the tax mechanism used in Japan was World War II, when it became heavily protected. Capi- also of great importance. In sharp contrast to the case tal outflows from agriculture were substantial, trans- in many of today's developing countries, taxes were ferring resources to other sectors of the economy. The levied by a direct land tax. This did not undermine agricultural tax system is thought to have played an agricultural incentives by lowering producer prices. important role, but, in fact, the lessons from Japan are On the contrary, agriculture's terms of trade generally more complicated. improved from 1888 until the 1930s, when the terms of The net capital flows out of agriculture were espe- trade turned moderately against it under the influence cially important in the first quarter century of Japan's of increased agricultural supplies from Japan's colo- development (see Box table 4.9A). They accounted for nies. Furthermore, the level of agricultural taxation 27 percent of nonagricultural gross capital formation was low in comparison with the tax burdens common between 1888 and 1902 and 23 percent between 1903 in developing countries today. As shown in Box table and 1922. The public sector accounted for about two- 4.9C, the tax burden was less than 7 percent of gross thirds of the transfer in the earlier period, but only output and less than 9 percent of value added; it was one-quarter in the later period. Tax transfers, there- falling throughout the period. fore, do not seem to have been a dominant cause of the reallocation of capital for very long, but agricultural Box table 4.9B Intersectoral movements of labor taxation was clearly important in the early years of in the Japanese economy, 1888-1940 development. Increase in Outflow of These public sector transfers, however, are only part agricultural nonagricultural Agricultural of the picture. The movement of labor out of agricul- labor force labor force contribution Period (millions) (millions) (percent) ture needs to be taken into account. Between 1888 and 1900 (see Box table 4.9B), two-thirds of the increase in 1888-1900 1.5 2.3 67 nonagricultural labor was due to the migration of 1900-1920 3.7 4.7 79 farmers and their families; this contribution increased 1920-1940 3.7 7.3 51 to four-fifths in the next two decades. Econometric Source: Ueno (background paper). models that simulate what would have happened without the transfers of either capital or labor indicate Box table 4.9C Tax burden as a share of output and which of the two played the more important role in the value added in agriculture in Japan, 1888-1937 development process. The studies concern the periods Direct tax Direct tax 1907-37 and 1955-68. Their results suggest that labor as a percentage as a percentage migrationand not, as is commonly thought, the flow Period of gross output of value added of savingshad the bigger impact. Given that private 1888-1902 6.8 8.6 capital flows dominated public sector flows through- 1903-1922 5.8 7.2 out both periods, it would appear that neither capital 1923-1937 5.1 6.4 flows nor the tax system has contributed greatly to Note: Value added is gross output minus current input. Japan's success story. This, however, may not have Source: Ueno (background paper). Box table 4.9A Capital flows from agriculture to nonagriculture by source of flow, 1888-1937 Net public sector Net private sector Percentage of Percentage of Flows nonagricultural Flows nonagricultural Period (millions of yen) investment (millions of yen) investment 1888-1902 36 18 19 9 1903-1922 65 6 198 17 1923-1937 -37 -2 -30 -1 Source: Ueno (background paper). 81 agriculture and elsewhere. The key issue is not come due to export taxes increase more than in whether agriculture should be taxed, but how de- proportion to increases in the tax rate. These losses veloping countries can avoid the excessive costs of are referred to by economists as efficiency costs, or taxing agriculture. efficiency losses. Whether revenues accrue to the central govern- The remedies for the high cost of taxation lie in ment, to a state government, or to a parastatal, all the use of other tax instruments or, to the extent too often revenue requirements are taken as fixed that countries are obliged to use export taxes, in before taxation policies are designed. The most lower rates. Searching for efficient ways to tax agri- common error is to assume that a certain amount culture is clearly a matter of high priority in devel- of revenue has to be raised. Public expenditure oping countries, although taxation should not be policies and taxation policies need to be examined so great as to produce the sort of discrimination together. There are often great wastes in public against agriculture described earlier in this chapter. expendituresfor example, in the financing of in- With commodity taxes, the preferred approach is efficient and highly capital-intensive industrial to focus on consumption rather than production. projects that are entailed in forced industrialization Commodity-specific excise taxes and broadly strategies. And, as the next chapter will show, based value added taxes that bear on commodities there are reasons to doubt the efficacy of spending purchased for consumption offer a convenient on programs that bear more immediately on the means of raising substantial amounts of revenue agricultural sector. Apart from exploring the scope without impairing the efficiency of production. Al- for reducing the total revenue raised from agricul- though their imposition at the retail level may be ture, governments should also be concerned with beyond the administrative capabilities of most de- the form of taxation. veloping countries, taxes on consumer goods are The previous sections have given some indica- regularly applied at the point of import or at the tion of the high costs of agricultural taxation. There factory gate. To the extent that more of these goods are two reasons they are so high. First, countries are consumed by the relatively rich, this option have relied heavily on export taxes or on the pric- also contributes to the overall progressivity of the ing policies of export marketing boards because of tax system. As a source of revenue, greater use of the perceived difficulties of administering direct economy-wide taxes on consumption offers an im- taxes in rural areas. Second, the rates of taxation portant alternative to the excessive taxation of agri- on specific exports have often been high. As cultural production. shown in Box 4.10, the losses in real national in- Direct taxes offer another alternative to export or Box 4.10 The efficiency cost of export taxes The loss in real national income caused by a tax is the efficiency loss for the last unit of revenue raised referred to as its efficiency cost. The efficiency cost of a from an export tax ( t) is t /(1-2 t). tax is additional to the administrative and collection Thus, if the export tax is 5 percent, getting the last costs and summarizes the net impact of that tax on dollar of tax revenue will cost only 5.6C. If, however, producers, consumers, and the government's budget. the tax rate is 40 percent, the last dollar of revenue will In the case of an export product, for example, the tax cost two dollars. Indeed, beyond 50 percent, total reve- will lower the price to producers and consumers and nues will decrease when the tax rate is increased, so generate revenues for the government. The losses of that it would be pointless to increase the tax further. the producers will have to be offset against the gains to This result is important for two reasons. First, the ex- consumers and the government. The efficiency cost port supply response assumed above may well be con- per unit of revenue raised is a useful indicator in prac- servative. This is quite likely because as the price in- tice. At the margin, the cost per unit of revenue in- creases, producers produce more and consumers creases more than proportionately to the tax rate. consume lessthe exportable surplus increases for To illustrate this, assume that the exports of a com- both reasons. Second, as noted in the text, export taxes modity rise in proportion to its pricethat is, if the have often been very high, especially when excessive border price increases by 10 percent, the export vol- parastatal margins are taken into account. ume also increases by 10 percent. On that assumption, 82 output taxes. The taxation of land is an approach with one minor exception in fiscal 1985, estates that has been used successfully in the past. Since have not been subject to export taxes. In this way, land taxes are paid regardless of how the land is substantial amounts of revenue have been gener- used, they discourage increases in productivity ated without depressing producer incentives. This less than does taxation through depressed prices. approach could be replicated in other countries The Japanese experience with an agricultural land where land ownership is highly concentrated. In tax is an object lesson in reducing the distortions Latin America, for example, about 1 percent of the caused by taxation (see Box 4.9). In this case, the population controls more than 50 percent of the rate of taxation was also moderateit captured less land and accounts for almost one-third of agricul- than 7 percent of agricultural value added in a sec- tural output and more than one-sixth of total GNP. tor that was benefiting from rising relative prices. The application of an income tax in such circum- And Japan's land tax was not unique in the late stances may be a more effective means of taxation nineteenth and early twentieth century. The agri- than efforts to introduce a more broadly based but cultural tax system in Thailand, for instance, was imperfectly implemented land tax. also based on a land tax. Since there was an open This approach parallels procedures in other sec- land frontier in Thailand and since there was con- tors of the economy where income taxes are usu- cern that a land tax would discourage settlement of ally confined to large-scale enterprises. Develop- new land, the tax was not applied to newly culti- ment of the tax system then involves expanding vated land. Different tax rates were applied to dif- the tax base by gradually incorporating smaller ferent kinds of land according to their fertility. As and smaller units. In agriculture, this process can in Japan, rates were kept low (between 5 and 10 be accelerated by using export taxes as presump- percent of agricultural output). Rights to land were tive income taxesthat is, export taxes or other linked to a household's ability to settle, cultivate, output taxes can be viewed as a prior collection of and meet the tax obligations on the land. The tax income tax. Large estates and other entities paying system and land settlement policy established a income tax on a regular basis would credit pay- system of independent smaliholders that is still ev- ments of export taxes against their income tax lia- ident in a low rate of landlessness and Thailand's bilities. Smaller concerns which may not have paid particular tenancy arrangements. income tax in the past would have the option of Despite its attractions, land taxation, once a sig- submitting a return should their payment of export nificant means of raising revenue, is now rarely taxes seem excessive. Given that agricultural in- used. Its demise cannot be explained by high ad- comes are usually much lower than those in urban ministrative and collection costs alone. A land tax areas and may often be below the standard exemp- register can be much less detailed and accurate tion for income tax, this procedure implies rates of than the registers needed to establish ownership effective export tax that are substantially lower rights. Recent developments in satellite imagery than those prevailing in many countries. and readily available information on access to wa- Yet another option is the use of multitiered price ter and proximity to markets can be used to set up systems whereby the tax falls on the intramarginal a workable land classification. Given the attractive- quota rather than at the margin. The agricultural ness of land taxation, expenditures involved in pricing system prevailing in China before 1985 pro- generating such information are likely to be worth- vides an example. To maintain incentives for in- while. Market prices for land can also provide esti- creased output at the margin, farmers were paid a mates of the quality of different types of land. higher "above quota" price (or an even higher ne- But broadly based land taxes are not the only gotiated price) on supplies in excess of their quota alternative to commodity taxes. Other alternatives deliveries. This approximated a land tax: the exist in most countries. For example, where the farmers were obliged to pay a fixed tax (equivalent taxpaying unit can be easily identified and the po- to the difference between the quota price and the tential revenue per taxpayer is large, the applica- higher price on residual sales multiplied by the tion of standard income taxes is both equitable and quota deliveries) and were free to sell all residual cost-effective. This is an easy option in countries output at a free market price. However, the ap- where significant production takes place in private proximation was not exact. Quota deliveries were or public estates. Tea and tobacco estates in Ma- restricted to basic food grains and a few other com- lawi, for example, have long been subject to per- modities that enter the subsidized food distribu- sonal income taxcollected on a pay-as-you-earn tion system. Thus, there was an incentive to evade basisand to company income tax. In contrast, the burdens and a need to restrict the freedom of 83 choosing which crops to grow. Quotas were set at not possible in all areas of the country, betterment different levels in different regions, depending on levies in project areas generally are. This issue is the state's need for particular commodities, so that explored further in the next chapter in the context the farmer's ability to exceed 'quota" deliveries, of irrigation projects. and therefore to gain access to high marginal This review of agricultural policies in developing prices, varied a great deal. Despite the disadvan- countries has not focused on the assistance that tages of such a multitiered system, it should still be governments have sought to provide through an improvement over the high marginal tax rates price stabilization and farm input subsidy mea- imposed by marketing parastatals in many coun- sures, nor has it reviewed the efficacy of consumer tries. subsidy programs in alleviating poverty and mal- It is also important to examine direct taxation nutrition. Do such programs reduce the bias options for cost recovery in various projects fi- against agriculture, or do they exacerbate it? That nanced by the government. Public sector projects is the central question addressed in the next in agriculture raise land values and thus create a chapter. potentially useful tax base. Even if land taxes are 84 Agricultural policies in developing countries Marketing and stabilization, subsidies, and policy reform Governments throughout the developing world marketing agencies. Usually, the intent is to assist want to provide the poor with an adequate diet agricultural producers by preventing "monopolis- and to promote a more productive and efficient tic" private traders from exploiting them. But, in agricultural sector. But, as Chapter 4 has shown, practice, marketing is an intrinsically difficult task their general economic policies, as well as taxes on for public agencies to perform well. This section farm outputs, tend to create a bias against agricul- looks at the performance of these agencies. ture. A reexamination of development strategies and of the excessive taxation of farm outputs Public sector marketing should be high on the agenda for policy reform. At the same time, it is important to review the The form, legal status, and range of functions car- price stabilization, consumer subsidy, and input ried out by public agencies vary from country to subsidy programs through which governments try country. In India, public corporations at both the to offset the bias against agricultural producers and national and state levels buy and distribute food. to assist low-income groups. Because the net bene- In Mexico, a large state monopoly controls im- fits of these types of programs are low in practice ports, domestic procurement, and the distribution as will be brought out in this chapterthey need to of a wide range of agricultural goods. In contrast to be redesigned or reduced considerably in size. The those organizations dealing in a variety of com- resources thus saved can be used for more produc- modities, many marketing agencieswith or with- tive purposes, including the many useful services out monopoly positionshandle only one com- that governments provide in agriculture. World modity. Statutory monopolies, or marketing Bank experience indicates that agricultural invest- boards, are commonly used to control the pur- ment, when carefully designed and implemented, chase and export of individual crops, both in Af- is no less productive than investment in other sec- rica and elsewhere. tors. The rate of return can be, and has been, very Governments often justify their involvement in high. The benefits from agricultural investments marketing with the argument that the private sec- are sensitive, however, to the policy environment tor is inefficient and can be monopolized by a small within which private markets operate. The types number of traders. There is little evidence that this of reform discussed in Chapter 4 and in this chap- is generally true. Various studies have compared ter are important in improving that environment. the efficiency of private and public sector market- Many countries have recognized the interdepen- ing. In Kenya, the public sector charged 15 to 20 dence between projects and policies and have un- percent more for marketing maize and beans than dertaken significant reforms. The trend toward did the private sector. Other studies have com- policy reform in developing countries is reviewed pared seasonal price changes in private markets at the end of this chapter. with the cost of storage, and price differences be- tween regions with the cost of transport. Data Marketing and stabilization from Ghana and Nigeria, for instance, revealed seasonal price rises that appeared to be close to the Governments seeking ways to influence producer cost of storage, which suggests that private traders and consumer prices often establish public sector were not able to develop monopoly powers. Price 85 movements for goods traded in free markets in Table 5.1 Price instability indices, 1964-84 West African countries also support the proposi- International price tion that efficient marketing channels help bind Commodity 1964-84 1974 -84 markets together. In contrast, numerous studies have indicated Sugar 90.8 51.5 Cocoa 37.3 34.1 that public sector marketing agencies can be rela- Rice 33.0 21.9 tively inefficient. Staffing is one problem. Key Coffee 32.0 37.7 managers are often chosen for political reasons. Palm kernels 27.5 32.5 Even if the top management is competent, it is Wheat 24.3 16.9 Tea 21.7 23.6 often pressured into expanding staff for political Jute 21.2 26.8 reasons. Flexibility in staffing is often lacking. Soybeans 20.8 9.9 Competence and morale often deteriorate. Finan- Beef 16.7 11.3 cial problems also are common. Funds may be in- Corn 16.6 15.6 adequate or released at the wrong time. Public Rubber 16.1 14.0 agencies also often have unrealistic and inconsis- Sorghum 15.6 13.6 Cotton 14.3 10.7 tent mandates to generate government revenue, Note: Index = provide cheap food, and create employment. Perhaps more important, public marketing agen- Ii fp_p\2 1, cies find it hard to handle the sheer complexity of markets, especially in areas dominated by where P and P are actual and exponential trend values, respectively, and N is the length of the period. Prices are mainly from the London smaliholders. The agencies have to buy small and New York markets, and they are deflated by the manufacturing amounts of food from tens of thousands, even mil- unit value (MUV) index (1984 = 100). Source: MacBean and Nguyen, "Commodity Price Instability" (back. lions, of widely dispersed farmers in places where ground paper). communications are poor and where existing local markets vary from place to place and change quickly. Whereas farmers want to sell a bewilder- ing variety of maize or millet of different origins, marketing agencies are not subsidized or protected freshness, or fine shadings of taste and quality, by legal monopolies. The government of Indone- each at a different price, state-organized systems sia, for instance, encourages public estates to buy usually offer only one or two prices for each grain. smallholder crops in order to guarantee farmers a Some offer only one purchase price throughout "fair" price. In some cases the public estates co- the year and for all locations. exist with private markets and influence their As complex centrally controlled systems are prices through competition. In many other coun- open to corruption, it is difficult for public agencies tries (such as Sri Lanka in the case of rice) the to adopt the differentiated pricing policies which public sector has been able to coexist and compete are needed to promote efficient trade. But the costs with the private sector. In both Indonesia and Sri of not doing so can be great. For example, when an Lanka, the private sector has proved more efficient agency offers a single price for all grades of a crop, and has increased its share of the market despite farmers want to sell to it only their lowest quality the subsidies that the public sector entities directly grade. When the agency is in charge of exporting or indirectly receive. the crop, as in the case of the rice marketing board Although they are often inefficient and costly, in Guyana, the low quality of its supplies discour- public marketing agencies nonetheless can provide ages foreign buyers. useful services. Some export marketing boards In most of sub-Saharan Africa, public sector mar- have helped increase exports by exercising quality keting agencies have a legal monopoly over trade control, arranging shipping, and providing pro- for a wide range of commodities, although the ducers with technical advice and information. It is growth of parallel markets has limited their influ- necessary to note, however, that these services do ence. Even when there is no legal monopoly, in- not require monopoly trading powers. Private ex- adequately differentiated and inflexible prices un- porters' or producers' associations could perform dermine private sector trading; so do unrealistic the same functions more efficiently. trading margins. Private traders have been Governments have an important role to play in crowded out in many countries, from Colombia encouraging efficient markets. They can assist and Peru to Kenya and the Philippines. competition, but creating public monopolies to off- Marketing problems are less severe when public set the threat of private ones does not do this. The 86 record of public marketing agencies suggests that 84 index for cocoa means that one can expect the physical trading in agriculture is a task better per- price in a typical year to be 34 percent above or formed by competitive private markets. When below the trend value for that year. The indices in public marketing is unavoidable, it is important to the table were compared with those for a large institute policies that do not discourage private number of manufactured products for the same sector participation. periods: in the majority of cases the indices for manufactured products were lower than 10, and Stabilization they seldom came close to 20. The variability of agricultural commodity prices Prices of agricultural commodities are expected to explains why governments in developing coun- vary more than the prices of industrial products for tries often try price stabilization schemes to protect three reasons: agricultural markets are vulnerable farmers from large price falls and consumers from to climatic changes; the short-run responsiveness large price increases. When greater price stability of supply and demand to changes in prices is usu- leads to greater income stability, farmers benefit ally less in the case of agricultural products than it from reduced risks. These benefits, however, are is in industrial markets; and the output of most extremely hard to estimate in practice, even crops is necessarily seasonal. As shown in Table though it is generally accepted that farmers are at 5.1, world market prices of the major agricultural least moderately "risk averse' 'that is, they are products have indeed fluctuated. The indices willing to accept a somewhat lower average in- shown measure the average deviation from the come stream for the sake of greater stability (see price trend in any particular year. Thus, the 1974- Box 5.1). Consumers and industrial users of agri- Box 5.1 Risk aversion in agriculture Farming is risky in that returns in any given year can of their incomes. With respect to controlled experi- be much above or below the average levels. Farmers ments and interviews, a notable set of experiments are said to be risk averse if they prefer a stable income with games of chance was carried out on rural house- stream to an unstable one even if their average in- holds in Maharashtra and Andhra Pradesh, India. Un- comes are somewhat lower with the stable stream. like many such experiments, the controlled gambles Measures that stabilize farm incomes without lowering involved payoffs of the same order of magnitude as the average incomes should, then, benefit farmers and those at risk in households' economic decisions in possibly encourage them to produce more. farming. Attitudes toward risk varied widely among The importance of income-stabilizing policies de- individuals when the stakes were low, but at payoff pends on how strongly risk averse the farmers are and levels in the neighborhood of monthly labor incomes on the nature of the risks they face. Economists have risk aversion was widespread. attempted to estimate the extent and importance of Estimates of risk aversion vary widely, and no quan- farmers' risk aversion in several developing and indus- titative guidelines are available. All that can be said is trial countries. The investigations have relied on two that moderate risk aversion is widespread among general approaches: (a) statistical examinations of farmers and therefore farmers will benefit if price stabi- farmers' input and output decisions in the face of vari- lization schemes actually lead to stable income streams able prices or returns and (b) interviews and experi- without much of a drop in average income levels. ments with controlled gambles intended to identify in- Nonetheless, such benefitseven if they could be dividual attitudes toward risk. quantified in particular caseswill tend to overstate One statistical study, which investigated the effects gains to farmers, since what matters is their total in- of revenue variability on the acreages planted with come and its variability rather than the income from a grains in the San Joaquin Valley in California, found particular crop. Farmers typically adopt risk-reducing that increased price fluctuations around a given aver- strategies in planning their cropping and nonfarm ac- age price had a small but negative effect on acreages. tivities, and they can also use formal or informal capital Another study compared the actual use of fertilizers by markets to smooth out income variations. The true farmers in Puebla, Mexico, with an estimate of the gains from income stabilization schemes are therefore profit-maximizing use. While different farmers dis- extremely difficult to measure and can easily be over- played different degrees of risk aversion, on average stated. One should thus be wary of price stabilization they would have required 11.2 percent more income in schemes promoted on the grounds of farmers' risk order to accept a 10 percent increase in the variability aversion. 87 cultural raw materials can also be similarly risk Governments can reduce such risks by holding averse. greater amounts of foreign exchange reserves, by But it is possible to overstate the benefits of stabi- using international capital markets, or by using the lization. Farmers, for example, can lose rather than Compensatory Financing Facility (CFF) of the In- gain if incomes fluctuate because of variations in ternational Monetary Fund (see Chapter 7). crop yields and outputsstable prices can then de- The use of these mechanisms will not, of course, stabilize incomes. It is also possible that, on aver- make domestic prices more stable than interna- age, the unit costs of raw materials for an agro- tional prices. If greater stability is sought, trade industry will be less if prices fluctuate than if they interventions become necessary. Thus, import tar- are stable. Moreover, farmers, consumers, traders, iffs can be used to keep domestic prices higher in and industrial users can reduce the risks they face periods of low prices, and import subsidies or re- by diversifying their activities, by using capital bates can be used to keep domestic prices lower markets, by storing products, and by sharing risks when world prices are high. Such a scheme is all through purchase and sales contracts. that would be necessary for a traded good; no pub- Stabilization is a particularly complex task for lic buffer stocks would be required. It is important any government to undertake, and its costs can be to note that while these schemes might be simpler very high. The mechanisms and costs of price sta- and less costly to operate than buffer stocks, they bilization depend on whether the commodity is are not without cost. As seen in Chapter 4, trade internationally traded. The discussion below is interventions involve efficiency losses which can confined to traded goods. become large as tariffs and rebates are increased. In the case of food, however, developing coun- FOOD CROPS. Stabilization of the prices of tries typically do not follow schemes of this sort. staplessuch as wheat, rice, and maizeis a major Instead of using import tariffs or rebates, govern- concern in many developing countries, where the ments establish trade monopolies; instead of rely- poor spend a large proportion of their income on ing on private storage, they run public buffer these foods. In many cases these staples are im- stocks. In some countries (Brazil, for example) spe- ported. What will happen if unrestricted private cialized agencies operate buffer stocks, while in foreign trade is permitted without any border mea- others (Mexico and India, for example) the stabili- sures, and how can stabilization measures be in- zation function is combined with other functions troduced? in particular, the provision of consumer subsidies In the absence of trade duties and quotas, do- in urban areas. mestic prices are determined by world prices at the Practices vary in other ways too. In many South country border, the exchange rate, and domestic Asian and Latin American countries, imports are marketing margins. Private traders can and do im- used sparingly to add to stocks, while more liberal port and store. Private markets can also manage policies are followed elsewhere, as in Indonesia. risks in other ways: For any given size of buffer stock, the choice be- Farmers can adapt their cropping patterns, tween domestic procurement and imports is criti- crop choices, and input uses to reduce the risks of cally important in controlling costs. For example, income fluctuations; consumers can adapt their in the case of India, great savings might be possi- consumption patterns by substituting different ble by increasing the use of trade, as discussed in items of food; agro-industries can smooth out cost Box 5.2. fluctuations by using the capital market and by The chief costs involved in a buffer stock opera- storing their inputs. tion are the costs of storage facilities and interest International futures markets can be used to charges. Because of inefficiencies in public opera- hedge risks, and options markets can be used to tions, the multiplicity of objectives that public provide insurance. These special types of agencies may be required to pursue, and the fact marketsexplained in Box 7.2 in Chapter 7are that governments often seek degrees of stabiliza- limited at present, but their growth would be pro- tion that necessarily entail losses, public agencies moted if developing countries were willing to use often need subsidiesboth direct cash subsidies them. and indirect subsidies in the form of low interest An unregulated system can, of course, cause rates on loans (see Box 5.2). fluctuations in the availability of foreign exchange, Subsidization of public buffer stock operations and the need to make large outlays for imports in crowds out private storage activities and leads to periods of high world prices cannot be ruled out. much larger public stocksand higher coststhan 88 Box 5.2 Food-grain buffer stocks and price stabilization in India The last two decades have witnessed a marked turn- therefore the costs of holding buffer stocks have in- around in India's food-grain sector. In the mid-1960s creased dramatically. India is currently reported to be India's food-grain economy was in severe crisis, and holding more than 30 million tons of grain as buffer the country was heavily dependent on imports of stocks, equal to more than two years of sales from the wheat, which were financed primarily through the P.L. fair price shop system. The large buffer stocks have 480 food assistance program. Since then the situation accumulated not necessarily because of a conscious de- has gradually improved, and impressive increases in cision to hold stocks at this level, but as an unintended food output have been brought about by a combination effect of other factors. The growth in food-grain output of large investments in irrigation, introduction of high- has outstripped growth in demand because the gov- yielding grain varieties, and increases in farm prices. ernment has repeatedly raised the procurement price. In addition to its efforts to increase food-grain output, A study conducted by the Birla Institute of Scientific the government has tried to ensure the availability of Research in India as early as 1977-78, when the buffer food grains to low-income consumers at stable subsi- stock was about 12 million tons, showed that the total dized prices. subsidy to the FCI was Rs6.75 billion (about 44 percent To do this the Indian government, through the Food of total sales). Of this, Rs5.66 billion represented direct Corporation of India (FCI) and other state agencies, cash subsidies, about 60 percent of which was in- runs one of the largest food distribution systems in the tended to cover the costs of buffer stock operations. world. Typically, the government purchases a part of Owing to the increase in the size of the buffer stock, the domestic marketed surplus of grain, monopolizes the direct cash subsidies grew to about Rsll billion in external trade, adds to or depletes existing buffer 1984-85. stocks, and sells the resulting supply through special The rising costs of buffer stock operations have led to "fair price shops." In a normal year the government a search for measures to improve the cost effectiveness sells about 10 percent of the total grain consumption; of the system. A study by the International Food Policy the figure rises to about 15 percent in a drought year. Research Institute, reviewing the options prior to 1983, The system has succeeded in providing greater price suggested that the same objectives of the wheat pro- stability for consumers than would have existed other- gram could be met at about a third of the actual costs wise. by increasing the reliance on international trade. A Despite the benefits to producers and to those con- more liberal import policy would have allowed drastic sumers who have access to fair price shops, the costs of reductions in the size of the buffer stock needed to running the system have been a source of continual meet the same stabilization objectives. While factors concern. In the 1960s and early 1970s, when India was other than storage costs are relevant in deciding on the a substantial grain importer, the food distribution sys- size of the buffer stock, this study indicates the impor- tem operated with relatively low buffer stocks in order tance of examining the increased use of international to moderate import needs. In recent years the size and trade as an alternative to large domestic buffer stocks. otherwise would occur. Especially when the farmers. It is extremely difficult to judge how floor agency is also responsible for subsidized food dis- prices are to be set. Usually, references are made to tribution in urban areas, the subsidies can be very the cost of production, but this varies at the margin large. They can also vary with fluctuations in do- with the production level; the question becomes mestic harvests and in international prices. This is how much domestic production is desirable. Mis- one reason why public agencies can be forced to takes occur frequently. By setting procurement procure food at less than market prices; this natu- prices too high, the public agency may end up rally leads to restrictions on private internal trade. buying massive stocks, as happened recently in These policies defeat the objective of assisting do- India (with wheat) and Brazil (with maize). mestic farmers. Restrictions on internal trade Since public agencies can receive subsidies, which have been practiced not only in Africa but considerations of profitability do not determine the also in China and Indialead, like restrictions on difference between floor and ceiling prices. Floor international trade, to higher instability in prices. and ceiling pricesand a public agency's ability to Three additional problems that tend to arise fre- implement themvary in practice from season to quently are: season because of conflicting pressures from differ- As distinct from pure price stabilization, gov- ent interest groups, fluctuations in the budgetary ernments also try to guarantee a floor price for subsidies available, and changes in the trade and 89 exchange rate policies of the country. The net EXPORT CROPS. Prices of exportable raw materials result can be greater instability in domestic prices. and beverages can, in principle, be stabilized by A comparison of annual domestic and world price variable export taxes and subsidies. Export subsi- movements for the 1967-81 period for grain in dies are generally not used explicitly, but occur im- thirty-seven developing countries indicated that plicitly through changes in the profit margins of domestic prices were not significantly more stable marketing boards. Sometimes the only measure than world prices in many cases. used is a variable export tax that is waived when With sufficient subsidization, complete price world prices become too low. But public buffer stability is feasible, and it is not uncommon for stocks and floor price policies are also used in con- governments to maintain the same consumer price nection with export crops and lead to the same throughout the year. This can be enormously ex- types of problems discussed earlier. pensive, not only in terms of budgetary costs but Simplicity is as much a virtue in this case as in also in terms of the distortions introduced in pro- the case of basic staples. Papua New Guinea's duction and consumption patterns. buffer fund provides a good example (see Box 5.3). The objectives of stabilizing food prices and pro- The desirability of promoting private sector stabili- viding farmers with floor price guarantees present zation and risk management functions deserves hard choices for any developing country. When special emphasis in the case of export crops be- guaranteed prices are set too high and stabilization cause farmers and traders in these sectors are often is carried too far, governments in developing coun- more commercialized and better organized than tries are likely to end up imposing higher costs on those in traditional crop sectors. However, the his- the economy than world price instability in itself tory of marketing board operations in Africa and would. Inefficient implementation of policies ag- elsewhere suggests that the stabilization objective gravates the problem. Greater priority should be can gradually give way to the objective of raising given to moderating stabilization and producer revenues at the expense of the producers. It also support objectives, to bringing about stability and suggests that the marketing boards inhibit the predictability of the public policy regime, and to emergence of efficient private markets. encouraging private sector operations. Consumer subsidies Governments in many developing countrie ' to provide essential foods to the poor at low a sta- Figure 5.1 Food subsidies as a percentage ble prices. Stable food prices help overco so- of total government expenditure in selected developing countries, 1973-83 called transitory food insecuritythe fact tlLaL the poor may not have enough to eat if the cost of food Percent suddenly rises or their incomes suddenly fall. But 50 stable food prices may not be enough to guarantee adequate food supplies for the poorest of the poor. Consumer subsidies on basic foods have, there- fore, been used to overcome chronic food insecuri- tythe long-term inadequacy of the poorest peo- ple's diet. Such investment in improved nutrition is an investment in a country's most important assetits human capital. This section explores the paradox that, while governments may be right to make these investments, they may go about it in the wrong way. While food subsidy programs are common in the developing countries, they differ widely in the foods they cover and the people they aim to bene- fit. The way they are funded varies too, but in most countries the costs have been shifted back to farmers in the form of low farm prices. This has 1973 1976 1979 1983 been accomplished through export taxes in food- exporting countries, through legal marketing mo- 90 Box 5.3 Papua New Guinea's buffer fund Until 1977 the government of Papua New Guinea paid ducer price fluctuations thus split the difference be- farmers who grew three main export cropscopra, cof- tween fast-changing world prices and slower changes fee, and cocoaa price based upon their costs of pro- in the moving average. duction. Official agencies worked out a price that This scheme has three advantages. First, since the would generate a return to smallholders at least equal Cocoa Board regulates the price only by taxing or sub- to the minimum rural wage and adopted it as the offi- sidizing the export price, it does not need to get di- cial support price. The stabilization scheme for copra rectly involved in the buying or selling of the crop. The has operated on this basis since its inception. But the subsidies and taxes are passed on through private trad- government has changed the cocoa and coffee schemes ers. Second, it avoids some of the fiscal and monetary and plans to change the one for copra soon. drawbacks of other schemes. The buffer fund based on Two problems caused the government to rethink its the tax subsidy system is self-financing, so it does not cocoa policy. First, world prices remained far above destabilize the government's spending plans. Third, minimum prices and it became apparent that though the cocoa program does not require physical stockpil- the farmers had a guaranteed minimum price, it was ing. rarely effective; the scheme in effect taxed them by The Coffee Industry Board operates its buffer fund depressing the average price they received. Second, somewhat differently because it has an additional role the cost of production proved to be a dubious criterion to fulfill. Papua New Guinea is a member of the Inter- for setting the support price because the cost varies national Coffee Organization (ICO) and must control widely among farms and because such a system inter- exports to ICO consumer countries in accordance with feres too greatly with market signals. If the floor price the ICO's quota system. If domestic production ex- were set low, it would discourage the efficient devel- ceeds Papua New Guinea's quota (plus any sales to opment of the industry; if it were set too high, the non-ICO consumer countries), the difference is held in government would run into financing problems and domestic stocks financed by the fund. The fund, there- end up supporting an industry of uneconomically fore, needs sufficient resources to finance stockholding large size. The government therefore decided to gear for several years. If funds get too low, no subsidies are the price-stabilization scheme more closely to world paid whatever the world price. Otherwise, the coffee prices. This was done by shifting the target price from scheme is similar to that for cocoa: whenever the world a level based on the cost of production to a ten-year price falls below 90 percent of its ten-year average, a moving average of world prices, adjusted for inflation. subsidy is paid equal to half the difference between the A new program was set up in which farmers received a two prices, and whenever the price rises above its ten- subsidy or had to pay a tax equal to half the difference year average, a tax is levied equal to half the difference. between the ten-year average and the world price. Pro- nopolies which pay low prices for domestically do not disappearespecially when, as shown in produced food crops, and through sales at low Figure 5.1, consumer subsidy programs account prices of imported food. for large shares of government expenditures. As seen in Chapter 4, these measures depress Food subsidy programs have other costs. Official food production and can be very costly if main- pricing systems usually respond slowly, if at all, to tained over long periods. An alternative is to shift changing market conditions. Price changes, which the burden of food subsidies to the general tax- happen continuously in free markets, usually re- payer. Governments can then raise farm prices and quire complicated bureaucratic procedures and use budget revenues to subsidize consumer prices. consultations. Sudden changes in market condi- However, when the difference between the high tions can result in rapid increases in budgetary producer price and the low consumer price be- costs. The high world prices of 1972-74 had a dra- comes sufficiently large, it is difficult to prevent the matic impact upon the food subsidy budgets of subsidized commodity from being sold back to the Bangladesh, Korea, Morocco, Pakistan, Sri Lanka, government at the higher producer price. In this and Tanzania. The stability of official prices was case, subsidies may be needed on processed com- achieved at the cost of instability elsewhere: in the modities. This is not always feasible. Even when it fiscal deficit or in the balance of payments as the is, efficiency losses will still be implicit in consumer subsidy burdens shifted to other activities compet- subsidy programs. While these losses may be more ing for foreign exchange. widely dispersed throughout the economy, they Some of the costs of food subsidy programs be- 91 come readily apparent when an overvalued ex- The benefits of food subsidy programs are change rate or consumer subsidies increase con- harder to estimate than the costs because it is diffi- sumption of imported foods at the expense of cult to measure social gains objectively. Granted goods that are produced locally. Per capita con- this, however, the programs may not benefit recip- sumption of wheat products and rice in West Af- ients in the way intended. Consider attempts to rica grew at an average annual rate of 8.5 and 2.8 help unskilled workers in towns by providing percent, respectively, between 1966-70 and 1976- cheap food. This may pull in more unskilled work- 80. Consumption of traditional foods has either ers from the countryside and eventually reduce ur- barely grown (by 0.27 percent for maize) or de- ban wages to parity with the level of rural ones. If clined (by 1.5 percent for millet and 1.69 percent part of the burden of these programs is shifted for sorghum). Such changes in diet were partly back to agriculture by depressing farm prices, rural connected with increasing incomes and urbaniza- wages will be reduced, which will harm unskilled tion. But the main reason was that urban con- workers in both rural and urban areas. This is what sumption was implicitly subsidized by overvalued happened in Thailand, where rice prices were de- exchange rates which made imports appear cheap pressed for the benefit of urban consumers. in comparison with domestically produced coarse The rural poor (small farmers, small traders, and grains. While the international price of rice was unskilled workers) tend to be dispersed, unorgan- three times that of sorghum, in West Africa it was ized, and politically inarticulate. Urban elites (or- rarely more than twice as much and sometimes ganized labor, the middle class, the military, and only the same. The price of wheat flour in Côte public sector employees) are typically organized d'Ivoire and Nigeria was about the same as that of and powerful. When governments intervene to set maize, while in developing countries with free the price of a commodity, political decisionmaking trade policies wheat flour often cost more than tends to take over, so that prices are determined by twice as much as maize. The strong correlation be- the relative power of the interested parties. Budg- tween wheat imports and real bread prices in Table etary limits often mean that only a part of total 5.2 shows the effects of exchange rate overvalua- supplies will be available at the subsidized official tions and consumer pricing policies. price. If so, the more powerful urban groups tend Table 5.2 Trends in bread prices and consumption and imports of wheat, selected years, 1969-81 (average annual percentage change) Wheat, 1969-71 to 1979-81 Real bread price, Per capita Per capita Count ry group 1970-80 consumption imports Algeria, Bolivia, Egypt, Ethiopia, Guatemala, Iran, Iraq, Mexico, Zaire Less than -5.0 3.5 11.7 Brazil, Dominican Republic, El Salvador, Gambia, Ghana, Kenya, Paraguay, Tanzania -3.0 to -5.0 3.2 4.9 Burundi, Cameroon, Ecuador, India, Kuwait, Libya, Malawi, Pakistan, Panama, Saudi Arabia, Somalia, Sudan 0.0 to -3.0 2.1 -1.9 Burkina Faso, Côte d'Ivoire, Hong Kong, Korea, Mauritius, Singapore, Turkey, Uruguay, Zambia 0.0 to 3.0 0.7 -3.7 Colombia, Costa Rica, Thailand, Venezuela 3.0 to 5.0 0.1 -4.4 Argentina, Bangladesh, Burma, Indonesia, Malaysia, Peru, Philippines, Senegal More than 5.0 0.1 -11.5 Source: CIMMYT 1983. 92 Box 5.4 Food subsidy reform in Sri Lanka Sri Lanka has a long history of food subsidy programs. of economic reform which included a significant re- Food rationing was instituted in 1943, and food subsi- alignment of the exchange rate, the decontrol of prices, dies for the whole population were continuously in and the opening of rice marketing to private traders. effect for the following three decades. Governments of This provided a great boost to production, but the gov- differing political persuasions continued to support the ernment also took measures to assist poor consumers subsidies in order to encourage political stability and during the transitional period. Initially, the govern- social equity. ment limited eligibility for food subsidies to lower- For the most part, the programs provided cheap rice, income groups only. In 1979, food rations were re- with occasional subsidies on wheat flour, sugar, and placed with food stamps, and the programs were powdered milk. The original rice ration of four pounds restricted to households with annual incomes below per person was distributed universally at between 40 Rs3,600 ($240). While a household survey conducted in and 70 percent of the market price. In the mid-1970s 1978-79 indicated that only 7.1 percent of the popula- one pound was provided free, and two were available tion lived in such households, it appears that almost at about a 30 percent subsidy. Rationed rice was typi- one-half of the population managed to get food cally providing about 20 percent of total caloric intake. stamps. Nonetheless, the beneficiaries were generally But in [969-70, for each additional calorie consumed from the bottom half of the population in terms of by those who did not have a nutritionally adequate income. diet, thirteen went to people with enough to eat or By holding the nominal value of the subsidies con- substituted for commercial purchases. More than half stant, the government ensured that the real cost of the the benefits went to middle- and upper-income fami- food subsidies would gradually decline without caus- lies. ing abrupt losses of benefits. Government spending In the late 1970s, as economic growth slowed partly was shifted from welfare programs toward invest- because of high welfare expenditures at the expense of ment. By 1984, food subsidies accounted for only 4 investment, the cost of the programs became too great. percent of government expenditures, compared with As the government tried to hold down the cost of pro- 19 percent in 1978 and 23 percent in 1970. viding the ration, the procurement price from domestic The process has not been without its reversals and producers was kept low, which discouraged local rice problems. But the government has been sufficiently production. As a result, the burden on the balance of encouraged to consider a new round of reforms to im- payments increased as more than 30 percent of the prove the targeting of the food stamps and raise their supplies were imported in the late 1970s. In 1977 the value. new government undertook a comprehensive program to get the cheap food first, and the others end up food that is eaten mainly by the poor. A high pro- buying more expensive food on parallel markets. portion of subsidized grain in Bangladesh goes to Reforming consumer subsidy programs, though urban areas. In 1973-74, the poorest rural house- desirable, is not easy. Such reform often raises holds consumed 167 pounds of grain a year, per food prices for the urban poor, who in some cases capita, 14 percent of which was provided as food- depend on subsidized food. Without some means grain rations. Comparable income groups in urban of dealing with this problem, needed reforms may areas consumed 263 pounds each, 90 percent of not be implemented or, if implemented, may not which was from food rations. The inequality of the stick. Box 5.4 discusses one case in which food distribution system, although less than in 1973-74, subsidy programs were reformed: that of Sri is still evident from the results of household sur- Lanka. It successfully avoided the problems that veys in 1982-83, with urban households receiving arise with too abrupt a change in policies. about twice the amount of subsidized grain re- Groups suffering from chronic malnutrition de- ceived by rural households. As a possible means of serve support, and the least-cost way of support- targeting food rations more effectively, experimen- ing them through government programs is to insti- tal subsidies for sorghum, a grain less preferred in tute much better targeting. For example, programs urban areas than rice and wheat, were introduced that restrict subsidies to the poorest region, or to in one urban and two rural districts. As expected, the poorest neighborhoods in poor regions, can be less than 5 percent of the urban households pur- cost-effective and well targeted. Subsidies can also chased the subsidized sorghum, but in rural areas be cost-effective when they are concentrated on more than two-thirds of the poorest families and 93 more than half of the lower-middle-income house- advantages to nongovernment organizations. Di- holds bought it. rect government spending on well-defined target In Brazil, subsidies on cassava are likely to be groups is also justified. The World Bank is sup- more effective in helping the poor than subsidies porting one such effort in Tamil Nadu, India, and on rice, bread, or maize. One study shows that a the results look promising (see Box 5.5). dollar of subsidy for cassava would generate 60C in benefits to low-income groups compared with 40C Producer support programs for maize, 23C for rice, and 18C for bread. While subsidies for sorghum or cassava may be a cost- Much of the growth in agricultural production in effective way of helping the poor, they raise some many developing countries is attributable to the potential problems. Many of the poorest people's expansion in irrigation (see Chapter 1). Between foods are also used for animal feed. Subsidies in- 1950 and 1983 the area under irrigation in develop- tended to lower food costs for the poor may also ing countries more than doubled. Even though the lower production costs for livestock, and this, in rate of growth has slowed, about 3.2 million hect- effect, subsidizes the rich. Diversion of low-cost ares are still being brought under irrigation each food to livestock feed has been a problem in both year, with Asia accounting for more than 40 per- Egypt and Zimbabwe. Even if it happens on a cent of the growth. In parallel with this growth in small scale only, it is hard to generate net benefits irrigation, but not solely due to it, the use of such from broadly based food subsidies once the admin- modern inputs as chemical fertilizers and machin- istrative and distortionary costs of raising the nec- ery has also grown rapidly. essary revenue are fully accounted for. To bring about increased use of these inputs and Many of these problems do not arise if subsidies of credit, governments in developing countries are narrowly targeted to support nutritionally vul- have generally followed a policy of subsidizing nerable groups, such as pregnant and nursing farm inputs. Increasing production has not been women, the very young, the sick, the very old, or the only objectiveimproving the distribution of the handicapped. Many governments have pro- income in rural areas has also been important. But vided incentives for such schemes by offering tax input and credit subsidy programs have run into Box 5.5 Targeting economic assistance in Tamil Nadu, India A successful project for helping nutritionally vulnera- nity nutrition workers was trained to take the program ble children and mothers is now under way in Tamil into their villages, and they are supported in their Nadu in South India. A survey carried out by the state work by women's working groups, averaging twenty- government in the early 1970s showed that half of rural five women in each village. Children are weighed ev- families consumed less than 80 percent of their daily ery month to determine how fast they are gaining caloric needs. Approximately 50 percent of children weight. Those who are gaining weight too slowly are between one and four years of age were classified as enrolled in a special ninety-day program in which they malnourished; 45-50 percent of child deaths were a are fed daily in community centers. Their mothers are direct consequence of malnutrition. The cost of treat- counseled on how to recognize early signs of malnutri- ing nutrition-related diseases was around $5.5 million tion and what to do about it. Severely malnourished a year, or nearly one-third of the annual state expendi- children receive double rations. Complementary ture for medical services. The government set out to health services are also provided. Prenatal health care improve this situation, especially for children under is routinely available to pregnant women; mothers in three years old. By 1980, twenty-five nutrition and special need get extra food to take home. Nutrition and feeding programs were operating at a total Cost of $8.8 health education are a crucial part of the project. This million. But their impact was less than it could have approach, by employing a sensitive but practical been, because they were not sufficiently targeted and growth surveillance system to identify children who were not monitored properly. are nutritionally at risk, allows supplementary feeding In 1980 the government initiated a five-year project to be highly selective and short-termtwo features to combat and prevent malnutrition and to promote that enhance cost effectiveness and avoid long-term health. It provides nutrition and health care for chil- dependence on food assistance. dren six to thirty-six months of age and for pregnant The project is now working in 9,000 villages of Tamil and lactating women. A special team of local commu- Nadu, benefiting around one million children and 94 many problems, including the large cost to the and output mixes. Recent analyses take fuller ac- budget. This raises the question of whether it count of market imperfections and the existence of would not be better to eliminate or greatly moder- public objectives other than income maximization. ate subsidies and use the resources thus saved for This has led to a long list of arguments in favor of other purposes, such as reducing taxes on farm subsidies on fertilizers: to encourage learning by outputs. The main problems and issues that tend doing, to overcome risk aversion and credit con- to arise in practice with input and credit subsidies straints, to help poor farmers, to maintain soil fer- are reviewed below. tility, to offset disincentives caused by taxing or pricing policies, or simply to increase output of Fertilizer subsidies priority crops. Taken together, this panoply of pro- subsidy economic arguments seems to present a In many countries subsidies cover the whole range formidable case for fertilizer subsidization. In fact, of inputsfrom plows to pesticides. But fertilizer however, most of these arguments justify only subsidies are very common. Rates of subsidy for temporary or small subsidies. And all of them ig- fertilizers in the early 1980s were rarely below 30 nore the negative institutional effects that almost percent of delivered cost and were in some cases always accompany fertilizer subsidization. For ex- 80 to 90 percent (in Nigeria, for example). Rates of ample: 50 to 70 percent are common. In Saudi Arabia and The learning by doing rationale is at best a Venezuela, farmers pay half the ex-factory or reason for temporary subsidies, and it is probably landed cost; urea is sold at 56 percent below cost in not applicable in many places. Even in the least Sri Lanka and at 60 percent below cost in Gambia. dynamic agricultural systems (for example, those There has always been some skepticism about in semiarid West Africa), fertilizers have been in the usefulness of subsidies on fertilizers (or other use for at least a generation. Where there are func- inputs). Until about the mid-1970s, it was com- tioning extension services, the fertilizer message monly thought that, while there might be some enters general circulation after a few years. Even justification for temporary subsidies, longer-term where services are poor, farmers have usually subsidies would result in nonoptimal input use heard about what fertilizers can do or have ob- more than 300,000 pregnant and lactating women. Par- decreased by 5 percent in the control block. ticipation rates in the project are unusually high; 80-95 The average weight of children increased in the percent of eligible children have taken part. About a pilot block and decreased in the other. Nutritional ad- quarter of them needed extra food at any one time, and vantages derived from the project were shown to per- 95 percent of those eligible took the supplements. Of sist through five years of age. At that age, children those who received supplements, 65 percent showed who had been in the project were heavier by 1.75 kilo- adequate growth velocity within 90 days and a further grams than children in other areas. The disease and 15 percent within 120 days; only 20 percent required mortality rates of children in the project also appeared extended supplementation. to be falling. The impact of the project has been monitored by Preliminary estimates suggest that the nutrition and comparing two blocks of villages, each with a popula- communications components cost approximately Rs72 tion of 100,000. One block, the pilot block, benefited ($6.50) per child per year, or RsO.20 ($0.02) per child from the project; the other, the control block, was out- per day. Expanded statewide, the total cost would be side the project. After three years, this comparison re- less than 1 percent of the state revenue budget. This vealed the following impact on nutritional status and compares favorably with the estimated costs of similar on illness and mortality: programs elsewhere in India. By targeting feeding to Severe malnutrition decreased by 32 percent in the those at riskwhen they need itthe food cost is sig- pilot block, but by only 12 percent in the control block. nificantly below that of most feeding programs aimed Moderate malnutrition decreased by 9 percent in at children of preschool age. The project appears to the pilot block, but increased by 19 percent in the con- offer a model for a cost-effective way of protecting the trol block. nutrition and health of the most vulnerable part of the The category of "normal status or mild malnutri- population. tion" increased by 20 percent in the pilot block and 95 served their effects on nearby farms. applications of animal manure with chemical fertil- Risk aversion, which leads farmers to use less izers was soil fertility maintained or improved. than profit-maximizing levels of fertilizers, may Apart from the foregoing considerations, special justify a little subsidization in some regions but not arguments are often put forward to encourage fer- much. Moreover, fertilizer use need not involve tilizer subsidy policies. It is often thought that fer- substantial increases in risk; for example, farmers tilizer subsidies are needed as a part of a fiscal apply top dressings of urea only after they are sure package to minimize the efficiency cost of raising a the crop is established. The impact of risk aver- given amount of revenue from farmers. If a gov- sion, judged by the difference between how much ernment wants to tax smaliholders and the only fertilizer should be used and actual levels of use, is feasible method is a tax on their marketed surplus, small. A World Bank study suggests that even the best way to raise a given amount of revenue when farmers are strongly risk averse, their fertil- may sometimes involve subsidizing fertilizers to izer use will be at most 15 percent less than it boost production and the volume of marketed sur- would be if they were trying to maximize profits. plus. Such an argument needs to be treated with Credit constraints arise out of capital market caution. First, the revenue targets should be exam- imperfections such as inadequate information ined carefully rather than taken for granted. Sec- flows, high transaction costs, and requirements for ond, the subsidy and tax rates may change radi- collateral. As a general rule it is better to eliminate cally over time, so that rapid policy changes will be the source of a problem than to compensate for it. required. Third, it assumes that subsidizing fertil- The long-term solution for imperfection in rural izers can offset the negative production response credit markets lies in improving the operation of to low producer pricesan assumption that is credit markets, not in subsidizing other inputs. questionable at best. Even when a subsidy can be The income distribution argument involves justified in special cases, the large and indiscrimi- many empirical questions concerning the nature of nate subsidies often seen in practice are not war- demand for fertilizers across households classified ranted. by income level and the adequacy and equity of Fertilizer subsidies are typically provided the rationing systems that often accompany subsi- through public distribution systems. Apart from dized input distribution. A study of fertilizer use in the inefficiencies that may be entailed in these sys- Senegal revealed that the benefits of subsidization tems, the distribution policies discourage potential went mostly to better-off farmersthose in better- private suppliers, such as traders, shopkeepers, watered areas. This is true more generally: those transporters, local artisans, and large farmers. The farmers benefiting most from irrigation also benefit most significant long-term cost of subsidy pro- most from fertilizer subsidies, and they often tend grams may indeed lie in the obstacles they put in to be better-off farmers. the way of private suppliers, whose services are The soil-enrichment and conservation argu- essential to transforming backward farm econo- ments in favor of fertilizer subsidies do not stand mies. Some of the problems that arise with public up under close analysis. There may be a case for a monopolies of fertilizer distribution are: temporary subsidy where population growth has Fertilizers marketed by the public sector often accelerated and farmers may not learn about fertil- arrive too late to be used to maximum effect. The izers fast enough to prevent severe damage to soil reasons for late delivery vary from country to quality. But in the most vulnerable areasthe country, but some are often inherent in public sec- semiarid tropicswhat is most often needed is the tor marketing itself. The agency involved may not adoption of less expensive and better adapted or- know what its budget is until relatively late in the ganic fertilizers and the use of moisture-retaining crop cycle. Where there is a central tendering methods, such as ridging to prevent rainfall run- agency for all goiernment purchases, the process off. Neither of these is encouraged by the existence is time-consuming. Distributing fertilizer in small of fertilizer subsidies, and such subsidies actually quantities to widely dispersed farmers can be ex- discourage the use of organic fertilizers. Moreover, tremely demanding. Where the public sector dom- there is some evidence that sustained use of chem- inates the transport system, the task often strains ical fertilizers can actually reduce fertility. In its capacity. Burkina Faso, for example, sorghum yields de- Government suppliers offer few varieties of clined after seven years of chemical fertilization, as fertilizer, although particular crops or soils need a result of soil acidification, potassium deficiencies, particular kinds of nutrient. Governments often and aluminum toxicity. Only by combining large charge all users the same price, whatever their lo- 96 cations. They offer very few alternatives in nutri- fields, releasing predatory insects and bacterial ent mix. In Cameroon, for example, only three pathogens, and carefully monitoring pest popula- types of fertilizer were imported in the early 1980s: tions. These techniques substitute labor and other ammonium sulfate, NPK 20-10-10, and urea. But inputs for chemical inputs. Heavy subsidies on specific crops and specific regions (soils) have pesticides geared to encouraging pest control can more finely defined needs. The "shotgun-type" have costly and unanticipated impacts on the approach nonetheless provides NPK 20-10-10, choice of techniques used to accomplish this goal. say, for both coffee and maize, in humid forest Especially in labor-abundant countries, it may bea zones and semiarid regions. In much of the Sahel, waste of resources to encourage the substitution of the fertilizer mix most commonly recommended chemical pesticides for human labor. for millet and sorghum is based on the available cotton complex fertilizer. Some indication of the Mechanization subsidies level of waste involved in these unrefined ap- proaches is found in a study in Senegal that com- Many developing countries promote agricultural pared optimal nutrient requirements with the stan- mechanization. Very large implicit subsidies arise dard compound fertilizer. The study indicated that when overvalued foreign exchange rates are com- about 20 percent of the cost of fertilizer could have bined with preferential allocation of rationed for- been saved with no negative effects on physical eign exchange for mechanical inputs, a policy pur- productivity. And this does not take account of the sued at one time or another by countries as diverse full gains possible from the use of more varied as Colombia, Egypt, India, and Pakistan. Often, combinations of nutrients. farm machinery receives preferential tariff treat- In many cases all of farmers' demand cannot ment compared with what a uniform revenue tariff be met at subsidized prices. This leads to ration- on all agricultural and industrial inputs would war- ing. Who gets how much fertilizer then depends rant. In Colombia in the early 1960s, for example, on the rationing process. Typically, the allocation the 2 percent import duty and the 3 percent sales process favors the bigger farmers and thus negates tax on imported tractors were small in relation to whatever equity benefits might otherwise have ac- the degree of overvaluation of the currency, while crued. in Peru the import duty on tractors, at 20 percent, The rationing process also leads to erratic fluc- was still lower than the average tariff on imports tuations in the actual cost of obtaining fertilizers, and far below the percentage by which the cur- and this hinders the learning process. Even when rency was realigned in 1967. In some cases agricul- farmers do learn the best uses of fertilizers, the tural income tax provisions provide another sub- feedback to public agencies is often slow and im- sidy by allowing farm machinery to be used as a perfect. For example, in Burkina Faso the exten- tax shelter. This is most often done via accelerated sion services continue to recommend that com- depreciation provisions. An extreme example of pound fertilizers devised for cotton also be used such a tax shelter is found in the income tax code for millet and sorghum, despite evidence that the of Brazil: it allows for a deduction from farm in- long-term effects on yield are likely to be negative. comes of six times the value of the machine in the The difficulties discussed above also arise in the first year, thus generating tax losses whenever case of pesticides. Subsidies on pesticides can radi- large machinery purchases are made. Other farm cally change the relative profitability of chemical- investments such as livestock are treated less fa- intensive as opposed to labor-intensive control vorably, and, of course, labor costs enjoy no pref- programs for pests. For example, it has been erential tax treatment at all. shown that pests in cotton fields in Egypt can be The benefits of subsidies are typically confined to controlled by (a) choosing planting times that large farms and to regions with favorable climates avoid peak pest seasons, (b) adding fuel oil to the and good infrastructure. The subsidies provide the irrigation water on the preceding crop, (c) hand- wealthy rural population with a competitive ad- picking egg masses from cotton plants, (d) care- vantage at the expense of poorer groups. For ex- fully monitoring insect infestations to guide the ample, in Brazil, as industrialization took place in timing and extent of chemical spraying, and (e) the state of São Paulo, labor was drained from ru- burning infested boils at the end of the season. ral areas to meet the growing demand for urban Rice farmers in South China have also reduced labor. In the face of rural labor scarcities, the de- their use of pesticides by adopting pest-resistant gree of mechanization would have been limited by varieties, raising insect-eating ducks in paddy migration of labor from the northeast. However, 97 the government provided large subsidies in an ef- fort to build a farm machinery industry and elimi- nated payments in kind to labor; this deterred the Box 5.6 Credit subsidies in Brazil use of labor and enabled the southern region to compete in the production of sugarcane by neu- Credit subsidies and controls have had a great impact on rural financial markets in Brazil. During the 1970s tralizing the northeast's advantage of lower labor the level of credit subsidies increased rapidly. This was costs. While sugarcane became profitable in the partly unintentional, as credit contracts were set in south, resources were diverted from other crops nominal terms and actual inflation exceeded projected that had a higher international value. rates. There is typically no economic justification for Between 1969 and 1976 the annual value of rural machinery subsidies. This is not to say that mecha- credit disbursed increased by four and one-half times nization cannot be profitableit can be when in real terms, while value added in agriculture roughly doubled. It is not clear that this credit was always used wages are high or when the nature of the opera- for the intended purposes. In fact, since agricultural tion makes it especially advantageous (for exam- credit in 1975-78 reached levels equal to total value ple, irrigation pumps). When it is profitable, added in agriculture, substantial amounts must have farmers can afford iteven small farmers can ben- been diverted to other purposes. The diversion of efit by using machinery rental markets. credit is also indicated by many instances in which the total area for which farmers got subsidized credit for a particular crop was larger than the area actually har- Credit subsidies vested for that crop. This is all the more remarkable since only a minority of farmers received any subsi- In almost all developing countries, governments dized credit at all. The 1975 census indicated that there have special programs for providing credit to were approximately 5 million farms, while in 1976 farmers, generally at low interest rates. Subsidized there were only 1.8 million credit contracts, and most credit programs usually have harmful side effects farmers using credit take more than one contract. The on financial institutions, rural financial markets, Association of Development Banks estimated that 23 and the wider economy. percent of agricultural credit was diverted to other pur- poses. Many of the problems encountered in practice There are doubts about whether any significant net result from the pursuit of two inconsistent objec- benefits were obtained from the credit subsidies, even tives: promotion of efficient production and the within the small part of agriculture covered by these provision of income transfers to the poor. As will be seen below, credit is an ineffective instrument for bringing about income transfers to the poor. As for the production objective, credit does not by itself promote productivity increasesall it does is INCOME DISTRIBUTION AND CREDIT. Rich farmers provide opportunities that farmers can take advan- have few problems in gaining access to credit. It is tage of. If less productive opportunities are ex- the poor farmers who face credit constraints, espe- ploited by farmers before more productive ones, cially if they do not have well-established claims to something else is wrongwhich is where attention their land. Even if credit is available to them, it should focus. Credit policy should not be seen as often seems excessively costly. an instrument for offsetting distortions elsewhere It is difficult to channel low-interest credit to which cause resource misallocations. low-income groups. Low interest rates stimulate Credit policy is often motivated by the belief that heavy demand for loans when resources are lim- small farmers are unable to obtain loans because of ited. Excess demand for credit is therefore com- inadequate collateral despite their ability to repay: mon (Box 5.6 provides an illustration from Brazil). that is, private credit institutions overestimate the Some form of rationing has to be introduced, im- risks of lending to small farmers. If this were so, it plying an increase in the effective cost of credit would be quite inappropriate to force lenders to above that suggested by the subsidized interest make such loans at highly subsidized rates. A bet- rate. The increase in effective rates can take several ter policy would be to subsidize credit institutions, forms. It can be shifted from the lender to the bor- rather than farmers, to induce them to take the rower by requiring more documentation, extra higher risks of lending to small farmers. This trips to town, or more queuing. Or it can be re- would provide an incentive to collect information flected by requiring borrowers to hold compensat- about the previously ignored borrowers and their ing balances or to provide extra collateral. Low- investment opportunities. income farmers tend to be excluded by the 98 programs. Since land provides a basis for access to ularly sharp (see Box table 5.6). As the volume of credit credit subsidies, land values increased rapidly. Elabo- from the federal and state banks fell more rapidly, rate regulations were instituted to limit the diversion of commercial banks were forced to carry an increasing subsidized credit. The tying up of entrepreneurial and share of the burden of making unprofitable loans. professional time and talent in working through the They in turn transferred the costs to nonsubsidized credit maze may have been one of the most Important loanswhich in turn contributed to real interest rates costs of these policies. of more than 25 percent for unsubsidized borrowers. The problem of credit diversion means that it is ex- This experience illustrates how the objective of sustain- ceedingly difficult to assess the impact of credit, posi- ing the growth of agricultural credit in real terms can tive or negative, on farm activities. There is some evi- be defeated by excessive subsidies and the rigidity of dence that excessive mechanization and fertilizer use nominal interest rate policies. were encouraged by the credit subsidies, but there is no clear empirical evidence to suggest that credit subsi- dies have increased production or yields. It is also doubtful that the subsidy programs have benefited Box table 5.6 Indices of the real value of rural credit low-income farmers, despite an intended bias in favor in Brazil for all banks, 1975-84 of the low-income northeast and smallholders. The (1979= lOW higher administrative costs of lending to large num- Short-term luz'estment bers of small farmers were a disincentive to the banks. Year Total credit credit credit Credit subsidies contributed to inflation and helped 1975 86 79 108 destabilize the overall economy. The growth in the vol- 1976 88 80 115 ume of credit, together with the widening gap between 1977 79 80 76 low interest rates and the cost of funds, led to subsi- 1978 80 80 80 dies that at one point in the late 1970s exceeded 5 per- 1979 100 100 100 cent of GDP. By the end of the 1970s this had become 1980 96 104 71 unsustainable. Since 1980 the subsidies have been 1981 83 93 51 gradually cut back by reducing the volume of real 1982 80 93 42 1983 61 67 41 credit. Since 1983 the value of the loans has been in- 1984 37 43 18 dexed. The decline in credit for investment was partic- rationing process. Because transactions costs are countries, including Thailand and Kenya, show frequently fixed according to the size of the loan, that access to credit depends partly on the nature smaller amounts tend to be rationed out first. As of land titles, since land is one of the few assets studies from countries as diverse as Bangladesh, farmers can use as collateral. The governments in Bolivia, Brazil, and Honduras have shown, these both countries are now trying to improve the qual- costs can make the apparently low interest rate ity of land titles. By removing restrictions on inter- nearly as expensive, in real terms, as the much est rates, governments can make it profitable for higher rates charged by moneylenders in informal financial institutions to develop their rural lending markets. activities. Indonesia has gone some way toward Cheap loans are therefore unsuccessful in redis- encouraging this, as discussed in Box 5.7. tributing income toward the rural poor. The value of the subsidy is proportional to the size of the CREDIT PROGRAMS AND PRIORITY CROPS. Many ru- loan, and small farmers tend to receive small ral credit programs use interest rate subsidies to loans. Studies have revealed that the typical pat- encourage farmers to use particular inputs or to tern is for large amounts of low-interest agricul- grow specific crops. But subsidized credit is widely tural credit to be concentrated in the hands of rela- diverted to other uses. Close supervision can limit tively few borrowers, who are generally better-off the diversion, but it is costly and difficult because and politically influential (see Box 5.6). farmers can reallocate other funds. Credit diver- Governments can help low-income borrowers to sion indicates that farmers' own judgments on the get credit by removing obstacles that limit their best investments do not coincide with the priori- access to commercial credit. Studies in a number of ties set in credit programs. 99 Even if the diversion of credit could be con- subsidized to fund the purchase of tractors, pre- trolled, credit subsidies may not be efficient ways mature mechanization can be encouraged. to promote particular crops or techniques. Many of When the policy environment is congenial and the benefits are offset by poor service and delays or the technologies profitable, the private sector per- wide swings in the availability of credit. By tying forms well in providing inputs and credit. As mod- credit to particular inputs or crops, the programs ern technology spread through the Philippines, can distort farmers' business decisions. If credit is sales of farm inputs became more lucrative and Box 5.7 Improving rural financial markets in Indonesia In the early 1970s the government of Indonesia began a rice production. It also became clear that other BRI credit program to promote rice production. Credit was activities (such as small saver and small loan programs) provided at low interest rates (12 percent, which was would have to be scaled down or abolished. Since the negative in real terms during most years of the pro- government had covered the operating losses of the gram), mainly for buying fertilizer. Fertilizer prices village branches as well as shared the risk for bad were subsidized, and the government raised the price debts, it appeared that the BRI would be left with more of rice to about 30 percent above import prices and than 3,000 branchesmore than 14,000 employees provided agricultural extension services. The subsi- and no obvious way of supporting them. dized credit was administered by the Bank Rakyat In- When reform finally came, in mid-1983, it was donesia (BRI), a government-owned, largely rural sweeping: direct controls on interest rates and the vol- bank, through a series of village branches set up in ume of credit were eliminated. The BRI decided not to irrigated areas where the potential for increasing rice close its village branches (and thereby lose a substan- production was highest. tial investment in trained employees) but, rather, to Rice production duly expanded, greatly facilitated, it reorganize them. Interest rates on most loans were was thought, by subsidized credit. After the mid- raised to more than 20 percent a year, and loans could 1970s, however, although the amount of credit dis- be used for almost anything. This was wholly unlike bursed under the program declined sharply, rice pro- the original credit program. The village branches con- duction continued to increase; this suggested that tinued to pay 15 percent a year on deposits (which was subsidized credit was not as important as other ele- higher than the rate of inflation). They also had an ments, such as better extension services and higher incentive to attract savings, because they made a profit farm prices for rice. And why had the amount of credit on lending, and the more deposits they had, the more disbursed declined? This was partly because credit un- they could lend. They also needed savings to offset the der the programs was not as cheap as the subsidized 12 reduced financing from the central bank. percent interest rate might suggest. The actual costs of The end of the subsidies benefited even those whom obtaining credit were higher, particularly because of the subsidies were designed to help. Between mid- attempts to tie the use of credit to a particular package 1983 and mid-1985 deposits at the village branches al- of inputs. Disbursements also declined because many most doubled. This made more money available for borrowers failed to repay their loans and thus became lending, and the amount lent under the new small loan inejigible for further credit under the program. These program reached more than $300 million. In addition, repayment problems necessitated larger government the village branches of the BRI had begun, overall, to subsidies and cast further doubt on the virtues of pro- break even. Far more borrowers repaid their loans: viding cheap credit. only 1 or 2 percent of total loans outstanding had pay- The village branches set up by the BRI became in- ments overdue in mid-1985far less than the default volvd in two other government programs that began rates under the old program. in the mid-1970s. The first aimed to encourage saving Because the loans did not have to be spent on rice, or by paying small depositors 15 percent a year on their on anything to do with farming in general, it may seem minimum monthly balance. Since this interest rate was as if the loans were an opportunity to move resources higher than the bank could charge on loans, a govern- out of farming altogether. Of the 900,000 borrowers, ment subsidy was necessary. The second offered small almost 750,000 said that they were borrowing for trad- loans at subsidized interest rates of 12 percent a year ing: 75 percent of these "traders," a recent survey funded by grants from the Ministry of Finance for di- found, were also farmers. Although other credit pro- versification in rural areas. grams continue to carry heavy subsidies, the reform of By the early 1980s, as the price of oil began to fall, it the village credit operations has been an important became clear that the government could no longer af- step toward sustainable rural financial markets and ford to support the program of subsidized credit for higher rural savings. 100 attracted new entrants into the farm implement subsidies often go hand in hand with lower de- business. This was not hampered by credit con- posit rates. The effects on rural savings can be very straints. Most of the new entrants were farmers, important. If interest rates are below the rate of and they used credit to attract customers. They inflation, savings rates are affected negatively. competed profitably with formal credit schemes by Some have argued that a negative interest rate offering quick decisions and agreements adapted does not deter rural savings because they believe to local circumstances. Some of these farmers even that these savings do not respond sharply to allowed repayment in kind. In addition to tailoring higher interest rates. But in India, where rural repayment terms to customer needs, they mini- branches were opened primarily to disburse agri- mized the risk of default by taking the advice of cultural loans, deposits were so substantial owing local farmers in assessing credit risks, by taking to the availability of generally positive interest strict measures against defaulters, and by offering rates that some authorities were concerned about customers a reliable and mutually profitable busi- the drain of funds from rural areas. The response ness association that was likely to yield additional in India has also been repeated in many other benefits in the future. Repayment rates to village countries which have improved incentives to rural bankers were much higher than to official lending savings. In Japan, deposits taken since the early institutions, even though the same groups of 1920s by agricultural cooperatives have been farmers borrowed from both sources of credit. greater than the agricultural loans financed by the cooperatives and have contributed to the private EFFECTS ON FINANCIAL MARKETS. Subsidized capital flows discussed in Box 4.9 in Chapter 4. credit affects both rural financial markets and the Savings in rural households rose rapidly in post- fiscal system. Where financial institutions are re- war Japan as rural incomes increased. Similarly, in quired to allocate a fixed share of their lending Korea, interest rates on loans and deposits almost funds to certain priority borrowers or sectors, the doubled after 1965, resulting in real rates of more cost of the implicit subsidy must be recovered by than 8 percent. Average savings in farm house- increasing the margins between the institution's holds rose rapidly by the mid-1970s. Sharply re- cost of funds and its lending rates elsewhere. Bor- sponsive savings have been features of the re- rowers who do not have priority will receive less formed village credit units established in Indonesia credit and pay more for it, and depositors will get (see Box 5.7) and savings and loan programs devel- lower interest rates. oped by coffee cooperatives in Kenya. Fixing nominal interest rates for long periods of timethe custom in most countriesmeans that Program-specific incen five systems the real interest rate varies with inflation. As the real interest rate falls (or rises), rationing and col- Subsidies and taxes of various types often form a lateral adjustments vary in ways that make it diffi- part of the packages of measures that governments cult to judge how the effective cost of obtaining take to promote the development of particular ar- credit varies to match supply and demand. Thus, eas and crops. Typically, these incentive systems governments lose control of the very instrument are designed to help achieve the immediate objec- that they seek to use in meeting their credit policy tives of development programs: for example, to objectives. Furthermore, depending on the attract farmer participation and to induce farmers method of financing used, attempts to increase the to choose inputs, crops, and other practices which volume of rural credit in real terms in periods of are judged necessary for their success. inflation can add substantially to the rate of infla- A crucial aspect of the success of a promotional tion or lead to very high real interest rates in other program is its continued financial and economic markets. Rural credit reforms should be combined viability after the initial period of years so that pub- with general financial sector reforms, and much lic assistance can be withdrawn or substantially re- greater emphasis should be given to flexible and duced. This requires not only that the farmers, market-related interest rates. traders, and others involved with program activi- Subsidized credit operations also make it diffi- ties start off with the right practices, but also that cult to encourage rural savings by increasing de- they have the incentive to revise their decisions as posit rates. Higher deposit rates increase the bud- circumstances change. And for long-term viability, get costs of the subsidy program. Also, a borrower the special incentives initially introduced need to taking out a low-interest rate loan can simply de- be gradually withdrawn. If a government agency posit the proceeds to earn a profit. Thus, credit remains involved for a long period of time, it must 101 emphasize flexibility in decisionmaking and take decisions on such key matters as the choice of crop account of the broader ramifications of the various and technique of production can become inflexible measures taken to assist program participants. and hard to change. The types of issues that need to be considered in TREE CROP DEVELOPMENT. Development pro- designing program-specific incentive systems for grams for tree crops illustrate some of the prob- tree crops can be quite subtle. Box 5.8 provides an lems that arise with heavily subsidized programs. illustration with reference to the rubber replanting Many governments encourage farmers to adopt programs in Thailand. new tree crop varieties and modern technology by establishing special agencies which set targets for IRRIGATION AND COST RECOVERY. While expan- the amount of land to be replanted or newly sions in public irrigation have been a major planted with the crops. The agencies sometimes achievement in developing countries during the demonstrate the new varieties or techniques for past few decades, the benefits from irrigation have limited areas and time. Where they do so, they do often been less than they might have been because not disrupt markets, especially if beneficiaries re- of poor maintenance and operations. In some pay the input costs. These projects can demon- countriessuch as Egypt and Pakistanreha- strate the high returns of recommended activities bilitation projects have become a higher priority to both farmers and potential suppliers of inputs than expansions into new areas. Excessive use of and credit. They stimulate, rather than crowd out, water has in some cases contributed to waterlog- the private sector. ging and salinization. In Peru, for example, 25 per- But agencies can also intervene for the worse, cent of the 800,000 hectares developed for irriga- especially if crop development activities are not tion in the Costa area have salinity problems. limited in time or coverage. Incentive systems in- Charging farmers for the water they use can in- troduced through the programs can have perverse crease the benefits of irrigation. If they have to pay effects both within program areas and outside, and for the actual amounts they use, they would use Box 5.8 Rubber replanting programs in Thailand For twenty-five years the government of Thailand has example of successful public sector intervention. supported schemes to encourage farmers to replant Programs of this type can, however, have adverse rubber trees. The main elements of this policy have side effects unless carefully designed. The efficiency of been grants to farmers to cover about half the costs of rubber farming is determined not just by the varieties replanting with high-yielding clonal varieties, a cess of trees but also by the quality of the tapping. Low- (tax) collected on exports of rubber to finance the re- intensity, good-quality tapping and costly mainte- planting program, and a separate export tax to raise nance are required to extend the productive life of the revenue for the government budget. Replanting grants trees and to increase the total output before replanting are disbursed over a six-year period under the supervi- becomes necessary. However, cost recovery measures sion of a replanting agency to make sure farmers fol- and pricing policies affect the choice of technique: the low recommended practices. cess and the export tax tend to discourage output, The replanting program in Thailand has two aims: to while substantial replanting grants may induce replant large areas of low-yielding rubber with modern farmers to adopt high-intensity tapping and poor high-yielding varieties and to make farmers aware of maintenance practices. If so, advantages of the tech- improved technology. After a slow and somewhat niques that the government wants to promote would shaky start in the 1960s, about a half million hectares be reduced, yields would be lower, and productive about 50 percent of the total rubber areahad been lives would be shorter than anticipated. replanted by the early 1980s. The substantial replant- The scheme may also discourage putting new land ing assistance encourages farmers to enter the program under rubber cultivation. Farmers who plant new land despite the cess and the export tax. The replanting are not eligible for grants, although they still bear the agency has successfully overcome many of the prob- burden of the cess and export tax. New planting was lems of implementation that have plagued efforts in the primary factor behind the growth in rubber output other countries. Appraisals show satisfactory eco- until recent years, when the accelerated replanting nomic rates of return. The program, which is being program became more significant. The decline in the supported by the World Bank, can be counted as an rate of new planting may have been related to an ear- 102 water sparingly, and crop selection would reflect requirements of the crops grown. the cost of water and other inputs. The revenue When charges based on actual water use are not generated would make it easier to fund mainte- feasible, there is a strong case for introducing bet- nance and further expansions of irrigation. The terment levies or access fees. Such fees can be ability of farmers to pay is unlikely to be an issue in flatso many dollars a hectareor they can be well-maintained systems, especially if fertilizers broadly differentiated by income levels. The logic and seeds are readily available in local markets. is simple. Governments in many countries spend Their net incomes can be several times higher, and large amounts of resources on irrigationfre- also more secure and stable, than those of farmers quently half of the total investment budget in agri- in nonirrigated areas. culture. As discussed in Chapter 4, raising a dol- Unfortunately, there are few countries where the lar's worth of public resources can often cost much controls on water use allow volumetric water more than a dollar because of the inefficiencies in- charges. In pressurized distribution systems, such volved in taxationin particular, the efficiency as those in Cyprus, France, and the United States, costs of taxes on farm outputs. In contrast, the water use can be monitored through meters in efficiency costs involved in a per hectare better- much the same way as other public utilities. Volu- ment levy would be minimal. Unless the levy is metric charges are also feasible in surface irrigation very large, the only costs would be those to admin- schemes if calibrated sluice gates are usedas in ister and collect it. Jordan, Morocco, and Tunisia. These charges are Like the land taxes discussed in Chapter 4, bet- also being used in the public tube-well schemes in terment levies are far better instruments for raising India's Uttar Pradesh. Even when water use can- revenue than commodity taxes. Thus, the large ex- not be monitored directlyas in most surface sys- penditures on irrigation create not only benefits for tems in developing countriesannual levies on ir- farmers but also the potential for raising resources rigated hectares permit some linkages with water much more efficiently than through general taxa- use if they are differentiated by the water-depth tion. In addition, betterment levies are equitable using them is much like using urban property taxes to finance urban improvements. Why is it, then, that the revenue generated from water charges and betterment levies in irrigated areas is typically not even adequate to pay for her increase in export taxation and the replanting effort maintenance and operation costs in developing itself, which focused public sector support on replant- countries? Part of the reason is the persistent no- ing. tion in some countries that water is a free good of Finally, the program may discourage diversification nature and should not be charged for. More impor- into alternative and possibly more profitable crops. Di- tant, the ability to impose betterment levies de- versification into other crops could undermine financ- pends on the actual betterment realized. This in ing of the replanting agency and its program, which depend on the rubber cess. Officials of the rubber re- turn depends on the reliability of timely water sup- planting agency are most familiar with that crop and plies to farmers, on the prices of outputs and of therefore tend to encourage replanting rubber with complementary inputs, and on the quality of ex- rubber. Moreover, replanting grants for other crops tension services. The poor record of cost recoveries have been lower than for rubber and depend on meet- in developing countries suggests that the full bene- ing exacting conditions. These reasons may have con- fits of irrigation investments are far from being re- tributed to the fact that, despite a wide variety of crops alized. for which grants have been given, the areas replanted In the case of irrigationso critical to continued with a crop other than rubber have been insignificant. These types of concerns have been kept in view in success in agriculturethe challenge is to design developing successive stages of Thailand's rubber re- systems and policies which permit better realiza- planting program. Despite the potential for such ad- tion of irrigation benefits and better cost recover- verse effects, the program has continued to be eco- ies. In view of the high cost of public finance, a nomically viable. This case also illustrates that scheme that permits higher cost recoveries is pref- developing countries can successfully specialize in pri- erable to one that leads to low cost recoveries, mary commodities for exports by promoting technical other things being equal. It may well be justified in change, despite long-run declines in real world market prices. some cases to choose irrigation systems with higher capital costs if they ensure good cost recov- eries. 103 Policy reforms of agricultural production, pricing and marketing of farm products, and allocation of labor between This chapter and Chapter 4 have highlighted many farm and nonfarm activities, it is appropriate to of the difficulties that inappropriate pricing, trade, consider the reforms and their effects in some de- and macroeconomic policies create for agriculture. tail. Some of the important lessons are: Before 1955, farming in China was carried out on Macroeconomic policies can introduce a se- some 100 million family farms averaging slightly vere bias against agriculture. Exchange rates and less than one hectare each. Between 1955 and 1958, the general pattern of prices and taxes need to treat the agricultural organization was transformed first the different sectors of the economy in an even- into cooperatives and then into some 55,000 com- handed manner. munes, and direct planning and procurement con- Consumer price subsidy policies are expensive trols were introduced. Sown area, output, and and often do not benefit low-income groups as procurement targets became the main instruments much as intended, whereas they benefit middle- of policy. There were some successes: the develop- and upper-income groups to a considerable de- ment and diffusion of modern seed varieties (espe- gree. Consumer subsidies can be effective only if cially high-yielding dwarf rice, hybrid maize, and they are restricted to the lowest-income groups hybrid sorghum); a two-thirds increase in irrigated and if their costs are controlled at levels that most land and an even greater increase in the share of developing countries can afford without having to land irrigated with water supplied from pumps; resort to highly distortionary or inflationary means and the development of a modern and large chem- of financing them. ical fertilizer industry. Input subsidies are not an effective method for Nonetheless, agriculture contributed only mod- offsetting the adverse effects of low output prices, estly to the growth of the economy during 1958- nor are they appropriate instruments for redistrib- 77, which itself was modest. The main reasons uting income, since most of the subsidies accrue to were the haste with which the commune system the larger and better-off farmers. was created, the emphasis on egalitarianism in the While governments have played an important distribution of rewards within accounting units, role in agriculture through expenditures on activi- the prohibition of private grain sales, the restric- ties which the private sector does not have the tions on internal trade, and the promotion of self- incentive to provide, their role in providing a sufficiency in staple foods at the provincial level. sound environment for private markets should not In the mid-1970s, per capita output of grain was be underestimated. Although significant progress no greater than two decades earlier. The produc- has been made in a few countries, other govern- tion of soybeans in 1975-77 was 30 percent below ments could do more by eliminating parastatal mo- the 1965-66 output, and per capita cotton produc- nopolies and by improving the legal and institu- tion was a quarter lower than in 1965-66. The slow tional framework required for the functioning of growth of farm output, combined with the strict competitive private markets. controls over the nonfarm activities of farm peo- The above list is not new: many governments in ple, led to near stagnation in farm incomes. By developing countries recognize the need for re- 1977-78, the average rural real income was, at best, form, and several have begun to implement reform only slightly above the level of 1955-57. By 1978, programs. The experience of the past decade has China was no longer self-sufficient in grain and begun to dispel the pessimistic notion that positive had to import grain to supply about 40 percent of reform is impossible because of political con- its urban population. straints. There have been strikingone might say The reforms which began in 1979 were designed revolutionaryreforms, and there have been oth- to improve incentives for farm people and to re- ers of a less sweeping nature that have had signifi- duce the intervention of the planning officials. cant positive effects nonetheless. Some elements of reform were instituted from the grass-roots level rather than from the top-level Policy reform in China government. The first major step was to increase farm prices by between 25 and 40 percent in 1979, The most far-reaching agricultural reforms of the the first significant adjustment in farm prices in past decade have been undertaken in the People's twelve years. The multitiered price system that Republic of China. Because of the scope of the re- was set up provided better prices, increased pro- forms, which touch all aspects of the organization duction, and boosted marketing through state 104 channels, as mentioned in Chapter 4. At the same Table 5.4 Growth in yields of selected time, relative prices of various agricultural com- commodities in China, 1957-83 modities were altered and the state eased long- (average annual percentage change) standing prohibitions against grain sales in rural Commodity 1957-78 1978-83 markets. The aim was to encourage different re- Grain 2.6 6.1 gions to specialize in the crops they could grow Cotton 2.1 11.5 most efficiently. In a few cases the state guaranteed Peanuts 1.4 6.0 supplies of grain to encourage specialized produc- Rapeseed 3.1 10.2 Sugarcane 0.0 4.3 tion of nongrain crops. Restrictions on trade be- tween regions were relaxed. The government also Source: Lardy (background paper). allowed experiments with disbanding the collec- tives in the poorest regions of the country. These reforms proved popular and successful, and by the (after cereals), harvests almost tripled between end of 1983 about 95 percent of farm households 1978 and 1984. The output of oilseed crops more were managing their own plots under contracts than doubled. Production of pork, beef, and mut- from collectives. To provide greater security and ton exceeded 15 million tons in 1984, up about 80 more incentives to invest in improving the land, percent since 1978. With the exception of aquatic many households have been guaranteed the right products, the levels of agricultural output achieved to manage their farms for at least fifteen years. by the end of 1984 far surpassed the target levels There is now some scope for subletting land, and for 1985 that were established by the Central Com- in some provinces new laws allow parents to hand mittee when it approved the first steps in agricul- down farms to their children. Collective agricul- tural reform in December 1978. China has also re- ture, by the mid-1980s, has given way to individ- versed its growing dependence on imported grains ual household management, if not formal owner- and has become a net exporter of coarse grains ship. (particularly maize), soybeans, and raw cotton-all The pace of agricultural growth since the reforms products that China had to buy on international began has been unprecedented (see Table 5.3). markets only a few years ago. In 1984, China regis- Grain output grew from 305 million tons in 1978 to tered its largest agricultural trade surplus in thirty- 407 million in 1984, an average annual rate of al- five years. most 5 percent. Grain production per capita has The remarkable growth in Chinese agriculture exceeded both the government's benchmark level since 1978 was achieved without sharp increases in of 302 kilograms per capita in 1957 and the level of total farm inputs: only the use of chemical fertil- per capita output achieved in the early 1930s-the izers increased. The amount of land under cultiva- last normal years before World War II. Perfor- tion declined by about 4 percent between 1978 and mance has been even more impressive in the non- 1983; so did the use of other inputs, such as water grain crops. After two decades of sluggish growth, and pesticides. The area of farmland under irriga- output has soared since 1978. In the case of cotton, tion, the quantity of irrigated land served by mech- traditionally China's second most important crop anized pumping, and the use of tractors for land preparation all fell in absolute terms between 1979 and 1983. Given increased employment opportu- Table 5.3 Growth in production of selected nities in rural small-scale enterprises, the number commodities in China, 1957-84 of rural workers engaged in farming has probably (average annual percentage change) declined as well. Average per capita farm income Commodity 1957-78 1978 -84 in current prices increased from 134 yuan in 1978 Grain 2.1 4.9 to 355 yuan in 1984. Even after allowing for price Soybeans -1.1 4.2 increases, there is little doubt that the real income Cotton 1.3 18.7 gains in rural areas during the past seven years Oil-bearing crops 1.0 14.6 have been very substantial and probably exceed Sugarcane 3.4 11.1 Sugar beets those achieved in the previous three decades. 2.8 20.5 Tea 4.2 7.4 With the possible exception of cotton, there is no Tobacco 7.0 15.2 evidence of a breakthrough in farm technology Meat 3.7 10.1 that could account for the growth in yields indi- Fish 1.9 4.6 cated in Table 5.4. It is true that there have been Source: Lardy (background paper). increases in the number of small tractors, in the 105 number of trucks used for rural transportation, and 1985 the required deliveries to the state were and in the use of chemical fertilizers. Yet most of eliminated for most farm products, including both the increase in productivity that lies behind Chi- cotton and grain. The two-tier price system has na's remarkable success story is the result of using been replaced by a single price and by procure- existing resources more efficiently. ment agency contracts with farmers. The reforms had numerous components in addi- tion to those mentioned. In particular, families Other reforms were permitted to engage in rtonfarm activities that had been forbidden on most communes. Rural Far-reaching changes in agricultural policies have fairs or markets that were circumscribed during also occurred elsewherefor example, in Chile the Cultural Revolution were encouraged again, and Turkey. The policy changes in agriculture that and there are now more than 43,000 such markets accompanied the general economic liberalization in rural areas and 4,500 in cities. Direct sales to in Chile after 1973 led to spectacular growth in the urban consumers by farmers were prohibited prior volume of agricultural trade. Agricultural exports to 1979. Township enterprises employed 60 million grew from $18 million in 1972 to $375 million in surplus farmhands by the end of 1980. At least 20 1984, partly the result of the more than tenfold million farm families have been permitted to be- increase in the volume of exports of fruits and veg- come specialized households and are no longer re- etables. Exports of wood products, pulp, and tim- quired to produce grain or other specific crops. ber rose from $26 million in 1972 to $376 million in Nor have the reforms come to an end. In 1984 1984. While the agricultural trade balance greatly Box 5.9 Agricultural policy improvements in Bangladesh Bangladesh shows how the types of policy reforms dis- The allocation to agriculture in the development bud- cussed in Chapters 4 and 5 can bear fruit on a large get, excluding the fertilizer subsidy, was restored to 28 scale in even the poorest countries. Bangladesh is one percent on average between 1978-79 and 1984-85. It of the most densely populated countries in the world, had fallen from 34 percent in 1973-74 to only 19 per- and its 100 million people had an average per capita cent in 1977-78. The acreage covered by modern irriga- income of only $130 in 1983. It has fertile soils and a tion facilities doubled, at a rate of expansion about relatively abundant supply of water, but few other nat- three times faster than during the previous five years. ural resources. Situated in the world's largest active The increase in public investment in agriculture delta, the country is prone to floods and cyclones dur- would have been impossible without a sharp reduction ing the monsoon and droughts during the dry season. in subsidies, particularly the fertilizer subsidy. Be- Agriculture is the heart of the Bangladesh economy, tween 1978-79 and 1984-85, the fertilizer subsidy was generating about 50 percent of GDP and accounting for reduced from about 10 percent of the development about three-quarters of employment and exports. budget to 2.4 percent. The unit subsidy fell from 50 The government's policy reforms began in the late percent of cost to 17 percent. Yet, despite this, fertilizer 1970s under exceptionally difficult circumstances. Af- sales have continued to grow by more than 10 percent ter the war for independence, agricultural production a year. One reason is that retail distribution of fertilizer declined, domestic food prices rose well above world was transferred to the private sector, which found it market prices, and rural wages fell in real terms be- profitable to distribute fertilizer throughout the coun- tween 1971 and 1975. There was a famine in 1974, and try at the right timea marked contrast to the frequent Bangladesh became heavily dependent on food aid. shortages of the 1970s, which often meant that fertil- Although growth in annual agricultural production izers could be had only at prices far higher than the picked up to 3 percent in the late 1970s, output in- official prices. Similarly, the entry of the private sector creased only slightly faster than population, which into the distribution of minor irrigation equipment has was growing at the rate of 2.6 percent a year. Another been an important reason for the rapid growth in farm famine occurred in 1979, after a serious drought. mechanization over the past few years. The government responded to these difficulties by Similar successes have been achieved in the distribu- expanding public investment in agriculture, concen- tion of food grains. The government suspended anti- trating on small irrigation projects with low costs and hoarding laws, abolished the accreditation system quick returns, increasing the role of the private sector, whereby grain dealers were designated to procure and improving the effectiveness of public agencies. grains on behalf of the government, and lifted restric- 106 improved, imports of foodespecially wheat, rice, value of exports dropped sharply thereafter, owing and maizealso increased during the 1970s. How- to the fall in world commodity prices, but the in- ever, as a result of better exchange rate policies, the crease in agro-industrial exports partially compen- domestic production of cereals grew by about 48 sated for this decline. Broader reforms within agri- percent between 1982 and 1984 and imports de- culture, which began in 1984, have already led to clined significantly. more liberal policies for the parastatals. The reforms in Turkey are much more recent. As Substantial policy reforms have also been under- part of the general reforms adopted by the govern- taken in Bangladesh, as discussed in Box 5.9. The ment in 1980, input subsidies and production price main elements in the policy shift were a sharp re- supports were reduced and credit subsidies cur- duction in the subsidies on fertilizers (which ac- tailed, The real exchange rate was significantly in- counted for as much as 10 percent of the develop- creased, with assurance that the new level would ment budget in 1979); an increase in, and be maintained, Exports were encouraged. While redirection of, spending on the infrastructure to the growth of agricultural GDP was low in 1981, emphasize small-scale irrigation, drainage, and due in part to oil shortages and poor weather, it flood control facilities; the liberalization of market- soon recovered to an annual rate of about 3.0 per- ing (with retail distribution of fertilizer privatized); cent in 1982 and 1983 and 3.7 percent in 1984. Agri- the elimination or reduction of export taxes on cultural exports, by contrast, responded immedi- many agricultural products; and the adoption of a ately, growing at an annual rate of 17.7 percent in more realistic exchange rate policy. 1980 and 1981. The annual rate of growth of the Serious reform efforts can also be seen through- tions that prevented the private sector from importing flood control facilities now cover nearly one-quarter of food grains. The private sector now handles about 85 the cultivated area, as compared with less than 10 per- percent of the internal marketing of grains. Aided by cent in the early 1970s. the construction of adequate storage facilities, the pri- Agriculture has become more resilient to natural vate sector has been particularly effective in limiting disasters. In four of the past five years, the grain crop temporary increases in food-grain prices between har- has set new records, despite bad monsoons, floods, vests. The reduction of subsidies to urban consumers and drought. enabled the government to expand rural investment Food-grain imports, though still high, have fallen and relief programs rapidly, providing food-for-work as a proportion of total consumption, and Bangladesh and nutrition schemes for the poor. The investments is now less dependent on food aid. A large and grow- have provided rural jobs equivalent to the full-time ing proportion of such aid, currently about 50 percent, employment of close to I million landless laborers and goes to finance programs specially aimed at helping have been used to maintain roads, canals, and em- the rural poor. bankrnents, which are essential to agricultural growth. Farmers have diversified away from rice to wheat. The government combined its reduction of subsidies Wheat is grown during the dry season between rice and expansion of rural assistance schemes with more crops, when fields would otherwise lie fallow; it is less appropriate exchange rate policies and the provision of expensive to produce and is better nutritionally. Over export incentives. It reduced or abolished export taxes the past decade production of wheat has risen from on jute, tea, shrimp, and other agricultural exports, almost nothing to nearly 10 percent of total food-grain which helped to sustain growth in agricultural exports. production. Consumption has increased from about 10 As a result: percent to nearly 20 percent of total grain consump- Agricultural production has grown at about 3.5 tion. percent a year. Exports have increased and become more diverse. Agriculture has directly or indirectly generated Jute exporters have won a higher world market share, most of the growth in employment, and rural wage,s despite slumping prices and declining demand. Ex- have risen about 15 percent more than food-grain ports of other agricultural commodities, such as prices. shrimp, tea, and leather, have grown by more than 10 The adoption of high-yielding varieties has in- percent a year and now account for 30 percent of total creased, fertilizer consumption has grown by more exports, compared with about 15 percent in the early than 10 percent a year, and irrigation, drainage, and 1970s. 107 Box 5.10 Cotton sector reform in Sudan Cotton is Sudan's main cash crop. It accounted for 56 skilled personnel migrated to oil-producing countries, percent of the country's export earnings in 1980-81. where job opportunities were more attractive. RemaIn- Public irrigation is the heart of cotton farming. The first ing managers were handicapped by red tape and weak large irrigation project was started in 1925 in the Ge- accounting systems. The agriculturalists running the zira, which is now the world's largest irrigation parastatal and the irrigation engineers running the scheme under single management; in all, more than 4 Ministry of Irrigation failed to coordinate water sup- million acres are under irrigation using Nile waters, plies. In the end agricultural services were not pro- with more than a quarter of the area under cotton. vided and known technologies were not adopted. The There are six large schemes operated by agricultural cotton became severely infested by pests, which parastatals, each divided into 200,000 tenancies of uni- proved difficult to control with the available technol- form size. The parastatals provide most inputs and ma- ogy. chinery, the Ministry of Irrigation (MO!) supplies the By late 1979, the country's balance of payments was water, and the tenants supply the labor, tend the crop, in crisis. The current account deficit reached 11 percent sprinkle the water, pick the cotton, and transport it to of GDP, external debt rose to five times the value of the ginnery. The ginned cotton is then handed over to annual exports, and the debt service ratio exceeded 40 the Cotton Public Corporation for export. percent. This triggered bold reforms for financial stabi- Cotton production fell sharply in the 1970s, drop- lization and promotion of exports. ping from 659,000 tons in 1974-75 to 259,000 tons in The government abolished the export tax on cotton, 1980-81. Both the area under cotton and the yield fell. lowered the exchange rate applicable to cotton exports, The main reasons for the decline were: set the domestic price near the export price, an- Low and declining producer prices. Some of the nounced the price before harvest, and paid it as soon problems were common to other developing countries: as tenants delivered their cotton. As a result, for the an overvalued exchange rate, export duties on cotton, first time in more than half a century, the tenants were high parastatal profit margins, and delays in payment able to estimate incomes from cotton reliably and could to tenants, sometimes as long as two years. Others lobby for, and negotiate, a remunerative price for cot- were peculiar to Sudan: a sixty-year-old revenue- ton. Simultaneously, several measures were taken to sharing formula between government, the parastatal, improve parastatal performance. These ranged from and the tenant (known as the Joint Account) under new statutes and better training to more concentration which the government siphoned off 36 percent of total on research, extension, and marketing. revenue and distributed the rest in a way which taxed Helped by good weather and new supplies of equip- the more productive tenant; and the practice of offset- ment, spare parts, and other inputs, cotton production ting the input costs of other crops (groundnuts, wheat, had a spectacular revival (see Box table 5.10). and sorghum) marketed by parastatals with earnings The success of Sudan's cotton farmers survived even from cotton. This was administratively simple but the severe problems which beset the country in 1984: made the inputs of other crops seem free, while cotton the abrupt introduction of Islamic law, the escalation of was made even less attractive. civil war in the south, and the unprecedented drought Shortage of the foreign exchange and local cur- in the west. The country's creditworthiness declined, rency needed to maintain the irrigation works and the and capital fled from the country. But because domes- marketing operations. Low cotton prices meant the tic cotton prices remained high enough to offset the parastatals could not to cover their costs, which led to effects of an overvalued exchange rate, cotton output foreign exchange shortages. Government money was continued to rise. Special arrangements were made to spent on new investments rather than maintenance. guarantee the foreign exchange (mainly from donors) External development agencies neglected the mainte- required to finance the needs of cotton production. nance and. rehabilitation of existing schemes and in- While the government's budget deficit widened, the vested in new projects instead. parastatals' finances improved because of higher Poor performance of parastatals. Senior and yields, better uses of inputs, and higher output prices. Box table 5.10 Production and yield of seed cotton in Sudan, 1980-85 Item 1980-81 1981-82 1982-83 1983-84 1984-85 Production (thousands of tons) 306 461 573 586 625 Yield (tons per hectare) 0.82 1.39 1.57 1.54 1.69 108 out sub-Saharan Africa. The reform of the cotton less, extensive in recent years. But the trend is to- sector in Sudan illustrates how much can be ward more open marketing arrangements and gained by taking small steps despite unfavorable price policies that are more favorable for agricul- trends in the overall economy. Sudan's irrigated tural growth. farming sector has been revitalized through Policy reforms in the pricing of fertilizers are also changes in the relationship between farmers and noteworthy. Following the early years of the management in irrigation schemes such as the Ge- Green Revolution, few notions took root as deeply zira. This has involved abolishing the export tax on as the notion that fertilizers need to be subsidized cotton (the major crop in the Gezira scheme), low- to encourage rapid technological change. Yet, re- ering the nominal exchange rate applied to cotton cently many of the East Asian countries have aban- exports, and announcing producer prices before doned fertilizer subsidies; such subsidies are de- the harvest and paying farmers promptly for their clining in Bangladesh and Pakistan. They have cotton. Cotton production doubled between 1980- been cut back sharply in Benin, Burkina Faso, 81 and 1984-85 (see Box 5.10). Mali, Niger, Senegal, and Togo. The subsidization In many other African countries producer prices of fertilizers and other inputs seems to be in clear for food have been increased in real terms, and it retreat throughout the developing world. has now become more profitable to grow staples to These examples illustrate the numerous reforms substitute efficently for imports. Real producer that have been undertaken or are under consider- prices of traditional export crops have also risen. ation in developing countries. Whether sweeping Unskilled workers can earn higher incomes in in scope or restricted to particular aspects of sec- farming than in wage employmenta radical shift toral policies, the reforms illustrate that political from a decade ago. Consumer food price policies institutions can have the capacity and the commit- are also changing in Africa, where urban con- ment to devise and carry out significant policy sumption has been heavily subsidized for many changes. This was also evident in the case of Sri decades. In countries from Madagascar to Maurita- Lanka's reform of its long-entrenched consumer nia and Zambia to Mali, sharp increases in prices subsidy program for rice, as discussed in Box 5.4. have reversed long-standing subsidy policies. While this reformist trend also illustrates the More competitive marketing arrangements are scope there is in developing countries for doing emerging. In some West African countries, export better, one must not lose sight of the policies in marketing parastatals have either disappeared (for industrial countries which greatly influence the ex- instance, for groundnuts in Mali) or have been ex- ternal environment. Do policies in industrial coun- posed to competition. In Somalia the monopoly of tries ease or exacerbate the difficulties faced by de- parastatals in maize, sorghum, and imported veloping countries? What domestic objectives are foods has been eliminated. Madagascar has liberal- being pursued by industrial countries, and can ized domestic rice marketing, and Zaire has elimi- they be met at lesser cost to themselves and to the nated its food marketing parastatals. The tendency developing world? These are the questions dis- is not universal, and there are cases where market- cussed in the next chapter. ing controls have been made more, rather than 109 Agricultural policies in industrial countries In the United States, the government pays farmers effect on farmers' incomes in the long run, they not to grow grain; in the European Communities, impose heavy costs on taxpayers and consumers. farmers are paid high prices even if they produce The net costs are largemore than $40 billion a excessive amounts. In Japan, rice farmers receive year in industrial countries. three times the world price for their crop; they The final section examines the impact on de- grow so much that some of it has to be sold as veloping countries of agricultural policies in indus- animal feedat half the world price. In 1985, trial countries. Though some developing countries farmers in the EC received 18C a pound for sugar suffer less than others, farming is hurt in all of that was then sold on the world markets for 5C a them. Prices for their products are depressed be- pound; at the same time, the EC imported sugar at cause industrial countries import less, and their 18c a pound. Milk prices are kept high in nearly subsidized exports even undercut developing every industrial country, and surpluses are the countries' farmers in their own markets. result: Canadian farmers will pay up to eight times the price of a cow for the right to sell that cow's The characteristics of agricultural policies milk at the government's support price. The United States subsidizes irrigation and land clear- The main objectives of agricultural policies in in- ing projects and then pays farmers not to use the dustrial countries are to stabilize and increase land for growing crops. farmers' incomes and slow the migration of people The main purpose of such policies is simple: to out of the sector. Underlying these objectives are raise farmers' incomes from what they otherwise the social and political aims of stable food prices would be. But why do the policies produce such and self-sufficiency in production, particularly in anomalous results? And what costs do they im- countries that have experienced wartime food pose on the industrial countries that implement shortages. These aims go hand in hand with such them and on the developing countries that are af- other goals as preventing environmental damage fected by them? This chapter addresses these ques- to the countryside and preserving the traditional tions in three sections: unit of farming. Support of farm incomes, how- The first section explains the characteristics of ever, has contributed to rapid technical change and agricultural policies in industrial countries. It higher production. The basic problem that many shows that, although the objective of raising farm industrial countries now face is how to counteract incomes is straightforward, the results have been excessive production while maintaining farm in- complicated. As each policy runs into trouble, a comes at politically acceptable levels. new one is added. This increases administrative complexity, raises costs, and makes agriculture How policies evolve more and more subject to political rather than eco- nomic decisions. Most industrial countries impose controls on agri- The second section counts the costs and bene- cultural prices, output, and acreage, as well as on fits of these policies to industrial countries and international trade. Agricultural policies do not concludes that, while they have surprisingly little change predictably in response to each new eco- 110 nomic shock or shift in priorities. They evolve un- 1980s the strong dollar caused even nominally con- evenly, balancing changing economic circum- stant U.S. support prices to be very high from the stances and a variety of often conflicting interests: point of view of grain importers and non-U.S. ex- the legacy of past policies, the political influence of porters. This led to drastic cuts in U.S. support farm lobbies, and the constraints arising from pub- prices in 1986. lic spending limits, administrative convenience, International commitments sometimes con- and international treaty obligations. And, while di- strain domestic policies. Because of international rect income supplements may be the most efficient ties dating back to colonial times, the EC still im- way of raising farmers' incomes, governments al- ports sugar even though it has become self- most invariably try to do so by means of agricul- sufficient and even exports surplus sugar. tural price supports or cost-reducing subsidies. The legacy of past policies weighs heavily Within that broad approach, however, there are upon current ones. Policymakers are averse to dis- different policies for different circumstances: mantling an administrative machinery that has If a country has a large enough share of the been laboriously constructed. Farm interest groups world market to influence the price, net importers are adept at defending gains from previous poli- will favor policies that reduce world prices; net ex- cies. It is difficult to change a policy even if its porters will favor the opposite. The ECa large failure can be demonstrated. Instead, a new policy importer of cereals when its common agricultural is introduced to offset its shortcomings. During the policy (CAP) was designedprotects grain pro- 1970s, improvements in milk yields reduced dairy ducers with tariffs and import levies, which tend costs below official milk support prices, which to depress world prices; the United States, cur- were actually raised. Governments found them- rently the world's biggest grain exporter, imposes selves flooded with milk surpluses, and spending acreage controls that are intended to raise prices. soared, increasing sixfold in the EC and fivefold in If public spending limits are tight, govern- the United States between 1974 and 1984. Instead ments willother things being equalfavor im- of lowering prices and letting consumers benefit port taxes over export subsidies. Both drive a from the technical progress, however, govern- wedge between domestic and world prices, but, ments have attempted to limit the amount of milk while import taxes earn revenue for the govern- sold at guaranteed prices (see Box 6.1). ment, export subsidies absorb it. Some markets are easier to support than oth- How much protection? ers. Support is easiest and cheapest for crops and products in which supply and demand are inelas- The first and most obvious effect of industrial tic, that is, quantities do not respond much to countries' agricultural policies is to raise domestic changing prices. As a rule of thumb, land- prices. Estimates of nominal protection coefficients intensive products have lower short-run elastici- (NPCs)domestic prices divided by border ties of supply than others. It is no coincidence that pricesfor several industrial countries and areas governments intervene more often in the market are shown in Table 6.1. for cereals than in those for poultry and pork. Ad- These estimates need to be treated with caution. ministrative convenience is also important. More With variable world prices but relatively stable do- complicated rules are needed if products are heter- mestic ones, nominal protection coefficients vary ogeneous and markets are geographically dis- widely over time. Table 6.1 shows values for 1980- persed. Governments can control the prices of 82, but in 1985 protection was typically greater be- fruits and vegetables, which are highly perishable, cause world market prices were lower. Domestic less easily than they can those of cereals, sugar, prices can be measured at several stages: the and milk. Because sugar and milk are marketed farmgate, the intervention board, or the wholesale almost entirely through relatively centralized pro- market. Different countries report prices at differ- cessing facilities, governments are able to monitor ent stages, which makes comparison difficult. their output without much difficulty. Qualities and varieties of commodities also vary; Exchange rate and macroeconomic fluctua- for example, many types of rice are consumed, and tions since 1972 have at times dominated commod- their importance varies from country to country. ity policies. In the early 1970s the worldwide com- Because agricultural policies affect world prices, modity boom and the weak U.S. dollar pushed the estimates do not measure what would happen world grain prices above the levels that had been to world prices if the policies were abolished. Fi- established by U.S. price supports. In the early nally, nominal protection coefficients do not mea- 111 Box 6.1 Price support in the dairy industry The world market for dairy products is a Creature of price. In fact, they are even encouraged to subsidize protection. Nearly every industrial country isolates their milk production, for they are reimbursed by-the and protects its dairy farmers with import barriers and EC for part of their subsidy. The results have been through domestic market intervention. Producer dramatic. Subsidies from the individual countries prices are determined by governments and are unre- amounted to almost 8 percent of the gross value of lated to the value of milk products in international milk at domestic prices. CAP dairy expenditures have trade. In the OECD countries, average domestic prices grown by more than 20 percent a year for a decade; have been roughly double world prices for the past transfers from consumers and taxpayers reached twenty years; however, because such large quantities $6,200 per dairy farmer ($410 per cow) in 1982. of dairy products are dumped in international trade, By April 1984, the burden of the EC's dairy policies the world market price is greatly depressed. Farmers had become unsupportable. Rather than reduce sup- have responded to the high internal prices in a rational port prices, however, the EC imposed production quo- manner: they have invested heavily in animals and tas. These are fixed nationally and are generally dis- equipment, they have adopted technical innovations tributed within each country to individual farmers. to improve yields, and consequently they have in- Quantities produced in excess of quotas receive the creased output (see Box figure 6.1). Governments have world price or less, so there is a strong incentive to therefore found themselves buying increasing restrain production. Indeed, production has fallen be- amounts of milk and have accumulated huge stocks. low quota levels because farmers have sought to avoid These stocks usually have to be disposed of on de- selling milk at merely its world price. But production pressed world markets or given away as food aid. remains far above consumption. Although consump- In some extreme cases, EC farmers paid more to im- tion averages about 85 million tons a year, the quota is port feedstuff for their cows than they could have re- fixed at 99 million tons. Thus, the quota system penal- ceived on world markets for the milk which the feed izes consumers by keeping prices high, encourages an helped to produce. Not only was no surplus generated inefficient pattern of production, and institutionalizes to cover the costs of domestic inputs-labor, transport, the EC's current excessive output. In response to these dairy equipment, processing, and so on-but the EC problems the EC has decided to reduce dairy quotas by even lost foreign exchange. The European Communi- 3 percent starting in 1987-88. ties would have been better off as a whole if some of The United States has had a similar experience. Sup- the farmers had not worked at all-indeed, if they had port prices for milk were steadily increased during the been paid not to work. 1970s in the face of low world market prices. Net The EC's budgetary rules compound the inefficien- spending on dairy support programs (valuing prod- cies of its dairy support program. The financial burden ucts given away at their cost to the government) grew of agricultural support is shared among the member from $150 million annually to $3 billion between the countries roughly in proportion to their GNP, but re- mid-1970s and 1983-84; transfers to producers were ceipts from price supports are proportional to milk out- estimated to have reached $26,000 per farmer in 1982 put. So countries race to increase national milk output, ($835 per cow). The government cut the producer price for they receive the full intervention price from the of raw milk from 13.1C a pound in 1982-83 to 11.6C in CAP but have to contribute only a fraction of that mid-1985, but stocks continued to accumulate. In De- Table 6.1 Nominal protection coefficients for producer and consumer prices of selected commodities in industrial countries, 1980-82 Wheat Coarse grains Rice Beef and lamb Producer Consumer Producer Consumer Producer Consumer Producer Consumer Country or region NPC NPC NPC NPC NPC NPC NPC NPC Australia 1.04 1.08 1.00 1.00 1.15 1.75 1.00 1.00 Canada 1.15 1.12 1.00 1.00 1.00 1.00 1.00 1.00 ECb 1.25 1.30 1.40 1.40 1.40 1.40 1.90 1.90 Other Europe' 1.70 1.70 1.45 1.45 1.00 1.00 2.10 2.10 Japan 3.80 1.25 4.30 1.30 3.30 2.90 4.00 4.00 New Zealand 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 United States 1.15 1.00 1.00 1.00 1.30 1.00 1.00 1.00 Weighted average 1.19 1.20 1.11 1.16 2.49 2.42 1.47 1.51 Averages are weighted by the values of production and consumption at border prices. Excludes Greece, Portugal, and Spain. 112 sure those internal policies that are not supported by border policies; in such cases domestic prices and world prices are equal. For example, U.S. acreage controls and deficiency payments affect in- cember 1985, legislation was passed to allow the gov- ernment to control milk production by buying and ternal and border prices of maize equally. butchering up to I million cows, but it is unlikely that Nonetheless, certain conclusions can be drawn this will constitute a long-term solution to the problem. from the table. First, dairy farmers receive gener- Most surpluses end up in stockpiles, for under an ous support nearly everywhere; so do rice and agreement concluded in the GATT's Tokyo Round, sugar producers. Second, Japanese and European butter cannot be exported at less than $1,200 a ton. farmers are more highly protected than farmers in Stockpiling dairy products is expensive, and quality is difficult to maintain. But patience can reap its own countries that rely on agricultural exports. Third, reward. In 1984 the EC claimed that its stored butter the relative rate of protection between commodi- had so deteriorated that it had become a new, inferior ties varies from country to country, which implies product-butter oil. Since there is no international that internal relative prices also vary. Thus, even agreement on butter oil, the EC was able to sell some of within countries there are distortions, as farmers its stock to the U.S.S.R. at $450 a ton-a mere 14 per- react to prices that have been set by policy rather cent of the price paid to farmers. than to indicators of scarcity and opportunity. Box figure 6.1 Milk production in the EC, 1974-84 Trade measures Millions of tons of milk Behind these complexities lies a distinction be- 115 tween border measures, which act on imports and Usable production exports, and domestic measures, which directly af- fect internal supply and demand. Take border 105 measures first. The simplest border measure for an Deliveries to dairies importer is the tariff-that is, an import tax-and 95 for an exporter, the export subsidy. Matters are rarely that simple. Variable import levies and vari- able subsidies-called export restitutions-are 85 more common. Consumption VARIABLE IMPORT LEVIES. Variable levies are the 75 cornerstone of the EC's common agricultural pol- 1974 1978 1982 1984 icy. They are also used by other European coun- tries, namely, Austria, Sweden, and Switzerland. Note: Data include butter, cheese, and powdered milk, converted to fluid milk equivalents. They make up the difference between the price of Source: Bureau of Agricultural Economics (Australia) 1985. imports delivered at the port and an officially fixed entry price at which foreign goods can be sold. The entry price-known in the EC as the threshold Pork and poultry Dairy products Sugar Weighted average' Producer Consumer Producer Consumer Producer Consumer Producer Consumer NPC NPC NPC NPC NPC NPC NPC NPC Country or region 1.00 1.00 1.30 1.40 1.00 1.40 1.04 1.09 Australia 1.10 1.10 1.95 1.95 1.30 1.30 1.17 1.16 Canada 1.25 1.25 1.75 1.80 1.50 1.70 1.54 1.56 ECh 1.35 1.35 2.40 2.40 1.80 1.80 1.84 1.81 Other Europee 1.50 1.50 2.90 2.90 3.00 2.60 2.44 2.08 Japan 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 New Zealand 1.00 1.00 2.00 2.00 1.40 1.40 1.16 1.17 United States 1.17 1.17 1.88 1.93 1.49 1.68 1.40 1.43 Weighted average c. Austria, Finland, Norway, Sweden, Switzerland. Source: Tyers and Anderson (background paper). 113 Box 6.2 Protecting sugar producers Sugar and its very close substitutes, glucose sugar and accounted for by HFCS increased, with corn sweeten- high fructose corn syrup (HFCS), are derived mainly ers surpassing sugar in consumption for the first time from three sources: sugarcane, sugar beets, and high- in 1984. The U.S. share of world raw sugar imports starch products such as maize. Sugarcane was the ear- dropped from an average of 20 percent between 1960 liest and cheapest source of sugar; use of the other two and 1973 to around 10 percent in the early 1980s. Pref- products expanded significantly only when supplies of erential deals continue to dominate international trade sugarcane were curtailed. The possibility of obtaining in sugar, the free market being of a residual nature. sugar from beets was recognized in the late eighteenth The experience of the United States illustrates the century, but it took Britain's blockade of Continental practical difficulties of operating trade restrictions. Un- Europe during the Napoleonic wars to make the til 1983, imports of sugar mixed with as little as 6 per- process commercially viable. More than 300 sugar beet cent of corn sweeteners were not restricted under the factories were established in France between 1811 and sugar import quotas. This, in effect, allowed con- 1813. Peace and sugar imports brought about their de- sumers to buy sugar at world prices, but growing im- mise, and it was only later in the nineteenth century ports led local producers to complain until the "loop- that European beet production revivedonce again be- hole" was plugged. However, with the domestic sugar hind protective barriers. Since then, sugar beet pro- price four to seven times the world price, it was worth duction has enjoyed high protection. it for firms to extract sugar from processed products The level of protection proved costly to industrial such as cake mixes. In January 1985, emergency regu- countries, especially when, in the 1970s, the new lations imposed a quota on all imports of sweetened sweetener HFCS became available. HFCS developed "edible preparations" for nine months. Unfortunately, in the shelter of sugar protection as the internal prices edible preparations included chicken pie, pizza, and for beet and cane sugar were driven further above noodles (with a sugar content of 0.002 percent); within world market prices than were those of its own raw two months the nine-month quota had been exhausted material, maize. and imports of an unintentionally wide range of goods The EC and the United States dealt with the impact ceased. of HFCS production differently, but the effects on Neither the EC nor the United States has been able to world trade in sugar and on developing countries were adjust its sugar policies to the changing economic envi- similar. The EC, already a major sugar exporter at the ronment. Rather, they have accepted increased market beginning of the 1970s, included glucose sugar produc- distortions and growing economic costs. In addition, tion in its quota system for sugar beets, thus generat- they have placed a great burden of adjustment on their ing even more subsidized export surpluses. The EC's trading partners, mainly developing countries. One share of world sugar exports rose from less than 9 study estimated that industrial countries' sugar poli- percent in the 1960s to more than 20 percent in the cies cost developing countries about $7.4 billion in lost 1980s, making the EC the world's largest exporter in export revenues during 1983, reduced their real in- 1982. In contrast, the United States allowed the HFCS come by about $2.1 billion, and increased price insta- industry to expand behind an import quota. As a bility in the residual world market for sugar by about result, the share of domestic sweetener consumption 25 percent. pricerepresents the minimum price of imports to changing world prices; nor can exporters. Worse, domestic users. Domestic prices are fixed annually by isolating a part of world consumption and pro- by the agriculture ministers of the member states. duction from world prices, variable levies reduce The cost of threshold pricing varies because world the efficiency and stability of world markets. Box prices and exchange rates change but domestic 6.2 spells out these points with reference to sugar prices remain' fixed as long as imports continue policy. and the domestic price is higher than the border price. EXPORT RESTTUT1ONS. Export restitutions are the Variable levies can insulate farmers and con- exporter's equivalent of variable levies. They per- sumers from world markets. But such insulation is mit domestic prices to be independent of world costly. Consumers continue to buy goods whose prices and above them. The result is to depress world prices have risen sharply; producers con- and destabilize world prices. Although the effect is tinue to produce goods whose prices have fallen. equivalent to that of an import levy, export restitu- Importers cannot, therefore, take advantage of tions are less widespread. Indeed, an export resti- 114 tution most commonly originates as a prop to an porter in the 1980s, and the switch was not the overextended system of import levies: having in- result of any comparative advantage in cereal pro- troduced levies to protect local farmers from cheap duction. imports, governments find themselves accumulat- Export restitutions entail the same kind of losses ing surpluses as the high level of support leads to the economy that import levies do, but can be domestic production to outstrip demand. Unable even more difficult to administerespecially to abandon price supports for political reasons, when, as in the BC, the restitution varies according they resort to export restitutions to dispose of their to the destination of the exports. Moreover, they surpluses abroad. The EC provides the best- are a drain on the public purse. This often leads known example of this phenomenon: a large-scale governments to reduce the level of price supports grain importer in the 1960s, it became a big ex- a products switch from imports to exports. For example, the EC's support prices increased by an average 0.3 percent annually in real terms between 1973 and 1978, but fell by 1.1 percent a year be- Figure 6.1 Threshold and border prices tween 1979 and 1986, when surpluses and the for selected grains in the EC, 1968-84 need for restitutions grew. ECU per ton Variable levies and export restitutions can be 300 Wheat high. Sweden's levies raise domestic beef prices to about 250 percent of world prices. Figure 6.1 250 shows the gap between threshold and border Threshold price prices in the EC for grains since 1968. In 1982-83 200 the cereal regime is estimated to have transferred 7.9 billion European currency units (ECUs), or $8.9 150 billion, from consumersand ECU 2.3 billion from taxpayersto producers. 100 TARIFFS. Fixed tariffs are less common than vari- 50 able levies in agricultural trade. They do not stabi- lize domestic prices and cannot guarantee farm in- 250 Maize comes, even in the short term, because internal prices vary along with world prices. High tariffs tend to be limited to markets which either are too 200 heterogeneous for variable levies or were not deemed important enough when the policies were 150 introduced. Most industrial countries apply tariffs to fruits and vegetables; tariffs on meat products, oilseeds, and tobacco are also fairly common. Tar- 100 iffs are relatively important in the protection of processed agricultural goods and tend to escalate 50 with the degree of processing. This makes it diffi- cult for developing countries to establish process- 250 Barley ing industries. 200 IMPORT QUOTAS. An import quota restricts im- ports of a product to a specified quantity or value (sometimes zero). Quotas are commonly imposed 150 on dairy products, sugar, beef, vegetables, and fruits and are applied by a wide range of countries, 100 including Canada, the EC, Japan, Switzerland, and the United States. Import quotas are some- 50 __. times dressed up as voluntary export restraint 1968 1970 1975 1980 1984 agreements between exporting and importing countries. Examples include Australia's dairy im- Source: Bureau of Agricultural Economics (Australia) 1985, p. 177. ports from New Zealand and U.S. imports of beef 115 from Australia. Import restrictions are sometimes country from changes in the world markets and associated with special trade schemes in which raise domestic prices. They can be even more both the price and quantity of imports are fixed. costly to the country that imposes them. The dif- U.S. imports of sugar from the Caribbean and the ference between domestic and border prices may EC's imports of beef and sugar from certain devel- be captured by exporters rather than collected by oping countries are examples. the government as tariff revenue. And the imports Like variable import levies, quotas isolate a may not come from the cheapest sources, because Box 6.3 Land restrictions and part-time farming Agricultural policy in Japan is based on two pieces of In 1955 Japanese agriculture appeared to be reason- legislation passed in the 1940s. Aiming to combine self- ably competitivecertainly compared with that of sufficiency in rice with stable consumer prices, the Sta- Western Europe. The farm price of rice was only 13 ple Food Control Act of 1942 divorced producer and percent above the import price, and Japan was close to consumer prices. It said that government purchase self-sufficiency. Thereafter, however, rising labor prices "are to be determined for the purpose of secur- costsdriven by Japan's industrial successcoupled ing reproduction of rice by taking into consideration with the cost of increasing capital intensity on such the cost of production, prices and other economic con- small farms, pushed up costs on farms faster than in ditions." Consumer prices "are to be determined for the rest of the economy. Given the government's aims the purpose of stabilizing the consumer's budget by of promoting self-sufficiency and supporting the farm taking into consideration the cost of living, prices and labor force, more protection from imports became nec- other economic conditions." essary. Behind strict import restraints, the domestic The second piece of legislation concerned land re- price of rice rose from one and a half times the import form. Agricultural land reforms between 1945 and 1950 price in 1961, to more than double it in 1970, to four transferred the ownership of approximately one-third times as much in 1979. Similar, though less extreme, of all farmland to former tenants, imposed maximum relative price movements occurred for such products sizes on farms, prohibited nonfarm residents from as wheat, beef, and dairy products. owning farmland, prohibited resident landowners Restrictions on ownership and leasing have encour- from renting out more than one hectare, and effec- aged farmers to subcontract certain tasks, such as tively outlawed the sale of land between farmers. weeding, soil preparation, and harvesting. More often, These measures reduced the proportion of farms oper- however, the restrictions have encouraged farmers to ated by tenants from 46 percent in 1945 to 10 percent take part-time or full-time jobs outside agriculture. by 1950 and 5 percent by 1965. Some renting was per- Only 20 percent of Japanese farm households contain mitted, but rent ceilings and the difficulties of reoccu- one or more full-time farm workers; 70 percent obtain pying rented land made it unattractive. Even after later more than half their income from outside activities. liberalization, only 4 percent of Japanese farmland was Living standards in these latter households are around leased in 1978. 25 percent higher than in full-time farm households. The land law inhibited the creation of bigger farms. The 20 percent of farms that have one full-time farm The average Japanese farm expanded from 1.01 hect- worker produce about 60 percent of total agricultural ares in 1950 to 1.17 hectares in 1977, whereas farms in production on 48 percent of the land. In rice produc- the United States grew by 50 percent on average. At tion, howeverwhich lends itself well to part-time the same time, the cultivated land area in Japan fell by workfarming is dominated by part-timers. They pro- about 8 percent and the amount of land that was duce about two-thirds of total output. double-cropped dropped from around one-third to al- In 1980, new legislation permitted larger farms and most zero; also, agricultural employment declined at encouraged part-time farmers to lease their land. Si- about the same rate as in other countries. multaneously, attempts were made to keep support Because the farms are small, total factor prices below the average costs of very small farms. productivityoutput divided by an index of all input Although the domestic price fell back to only three quantitieshas not risen as rapidly in Japan as else- times the import price during the 1980s, the structure where in the world. Farm size has been critical since of farming has not changed significantly. The principal 1960, when technology became more sophisticated and beneficiaries of Japanese rice policy are still part-time capital-intensive. In 1960 the costs of rice cultivation farmers. Full-time farmers have been prevented from were 20 percent higher on farms of 0.3 to 0.5 hectare exploiting their efficiency by the legacy of restrictive than on those larger than 3.0 hectares; by 1975 the land legislation. differential was more than 60 percent. 116 quotas on exports from different countries almost ports of tropical beverages. However, 70 percent of inevitably fail to reflect differences in costs. their sugar and confectionary imports and more A prominent set of import quotas or quantity than half of their meat and live animals and dairy restrictions can be found in Japan. Behind very imports face at least one barrier. Fruits and vegeta- tight restrictions on rice and beef imports, the Jap- bles and beverages other than tea, coffee, and co- anese government has raised domestic producer coa (mainly wine and fruit juice) are hardly af- prices to around three times world prices (see Box fected by variable levies; they are restricted either 6.3). These prices have generated large domestic quantitatively or by seasonal tariffs. Variable levies rice surpluses, some of which have been sold as are important for sugar, dairy products, meat, and animal feed or as subsidized exports. The losses in cereals. this market alone totaled about $6 billion in 1980. It is often alleged that countries use health and Production quotas and input controls quality standards to restrict imports. No one doubts the need for such regulations, but their ex- Production quotas grant farmers the right to sell a cessive or discriminatory use can be implicitly pro- specified quantity of a crop at a guaranteed price. If tectionist. Comparison of import restrictions in a farmer produces more, he must sell at lower four countries for which comprehensive figures are prices. To implement the quotas, governments available indicates that the percentage of food im- must monitor the output of individual farmers. So ports subject to health standards is 95 percent in far, this approach has been found administratively Japan and 94 percent in Norway, but only 55 per- feasible only for sugar, milk, peanuts, and tobacco. cent in Switzerland and 60 percent in Australia. Quotas are usually introduced when the budget These percentages do not tell the full story of pro- cost of surpluses becomes intolerable. If, for politi- tection, however, since they exclude the total pro- cal reasons, price levels cannot be reduced, quotas hibition of entry for certain products. are the only way to stem the outflow of public Table 6.2 summarizes data on border policies for funds. While production quotas have no direct agriculture pursued by industrial countries. It budgetary costs, they have significant economic shows which imports in industrial countries are costs. They penalize consumers by raising prices, subject to nontariff barriers (NTBs). The figures do they frequently allocate production rights to ineffi- not indicate how much each import is affected, nor cient farmers, and they can distort the markets for the value of imports affected, but merely the pres- competing products. Import quotas on sugar in the ence (or absence) of particular kinds of restriction United States have artificially stimulated the pro- in each trade category. The table shows that indus- duction of corn syrup. Similar consequences in the trial countries' imports of raw materials are largely EC have been forestalled by domestic production unimpeded by nontariff barriers; so are their im- quotas on corn-based substitutes. Table 6.2 The frequency of application of various nontariff barriers in industrial countries, 1984 (percent) Ta riff quotas Minimum price policies and seasonal Quantitative tariffs restrictions All Variable levies Total' Commodity (1) (2) (3) (4) (5) Meat and live animals 12.3 41.0 26.0 23.8 52.2 Dairy products 6.9 29.6 28.6 25.6 54.6 Fruits and vegetables 15.7 18.8 4.9 0.8 33.1 Sugar and confectionary 0.0 21.7 58.0 58.0 70.0 Cereals 1.7 10.9 21.7 21.7 29.0 Other food 0.8 16.3 13.5 13.2 27.0 Tea, coffee, cocoa 0.4 4.0 2.5 2.5 6.6 Other beverages 18.5 22.9 18.4 0.6 42.3 Raw materials 0.0 7.5 0.3 0.3 7.8 All agriculture 8.2 17.2 11.5 8.2 29.7 Manufactures 2.2 6.7 0.6 0.0 9.4 Note: Data are the number of import items subject to the nontariff barriers shown as a percentage of the total number of import items. The industrial-country markets considered are Australia, Austria, the EC, Finland, Japan, Norway, Switzerland, and the United States. a. This column will be less than the sum of columns (1), (2), and (3) if some imports are subject to more than one barrier. 117 The U.S. tobacco program is the oldest system of for their output if they leave some acres fallow (the production quotas still in effect today. According current practice in the United States). to a recent study, it cost consumers about $1 billion The administrative costs of commodity programs a year from 1980 to 1984. It did not even benefit all are formidable. The U.S. Agricultural Stabilization those who were growing tobacco. True, quota and Conservation Service maintains a staff of holders were better off by $800 million, but many about 2,600 full-time employees, several thousand of them had rented out their quotas. Producers more part-time employees, and some 3,000 county without quotas were worse off by $200 million. committees, each made up of three local citizens, The overall gain of $600 million to producers and usually farmers. In 1985 this cost $400 million. quota owners, coupled with the $1 billion loss to Countless decisions must be made: What is each consumers, implies a net loss to all concerned of farmer's program acreage (the land on which pay- $400 million. ments may be made) for each crop? What is the Once granted, production quotas are difficult to program yieldwhich determines how much the remove because they become valuable property farmer gets per acre from the legislated payment rights. In British Columbia, Canada, the right to per bushel? What can the farmer use his idled land sell the milk of a cow costs about eight times more for, if anything? Are his storage facilities adequate? than the cow itself. Such rents create substantial Is he complying with the programs' provisions? entry barriers to farming. They increase the Not surprisingly, it is too costly to monitor every amount of initial capital required, although they requirement, and local administrators may be do not affect the long-term rate of return on invest- tempted to give farmers the benefit of the doubt. ment in agriculture. Table 6.3 shows the prices that Acreage controls are also wasteful because they tradable quotas command and the capital outlay distort farmers' input costs. They encourage that they imply for family farms in Ontario, Can- farmers to farm their permitted acreage more in- ada. tensively and at higher cost. Ironically, in order to Controls on inputs are more common than con- benefit when their program acreage is updated, trols on output. Commonest of all are restrictions farmers may plow up land that might otherwise be on land. The United States has the longest history left as pasture, woodland, or swamp. Acreage con- of acreage controls. The first legislation, on grains trols and input subsidies work at cross purposes; and cotton, was passed in 1933; the most recent each increases the cost of the other. scheme, the payment-in-kind (P1K) program, was In the P1K program of 1983, U.S. farmers agreed started in 1983 and is in use again in 1986. Japan not to grow crops on a total of 77 million acres, 37 has also used such measures, first to reduce rice percent of the land sowed to grains, cotton, and acreage and then to reduce citrus fruit output. The rice in 1982. Drought scourged the Midwest farm government sometimes paid to uproot trees which states in 1983, and output in these crops fell by 41 had been planted on paddy fields that had been percent. Prices rose by an average of 16 percent. idled under a previous program. Farmers also gained because in payment for idling In a large and open economy, voluntary acreage their land they received up to 80 percent of the controls are easier to administer than production quantity they could normally have grown. These quotas. With quotas, all output has to be moni- in-kind payments came from crops that had been tored, and surpluses may have to be destroyed. stored by the government. The total transfer from With acreage controls, only the land has to be consumers and taxpayers was worth about $20 bil- monitored, and governments can induce farmers lion. On top of this, the P1K program cost livestock to join the system by paying them for each acre farmers and farm input industries billions of dol- they do not plant or by offering them higher prices lars because increases in feed grain prices could Table 6.3 The market value of quotas in Ontario, Canada, 1984 Size of family Quota cost Product Unit price x fann unit = to acquire farm Eggs $23 a hen 25,000 birds $580,000 Milk $3,500 a cow 40 cows $140,000 Tobacco $1.50 a pound 40 acres $310,000 Turkeys 54C a pound 25,000 birds a year $270,000 Source: Johnson, "Agricultural Protection" (background paper). 118 not be fully passed on to consumers and because United States two-thirds of the payments in 1985 farmers cut down on their use of fertilizers, seeds, were estimated by the U.S. Department of Agricul- and other inputs. ture to have gone to farmers who were wealthier than the average citizen. intervention and target prices Consumer subsidies In nearly every industrial country, the government offers to buy produce at a fixed price. This inter- Subsidies to consumers also contribute to the cost vention price represents the minimum return to of agricultural price supports. By making food farmers and, unless they are constrained by quota, comparatively cheap, subsidies raise demand for determines their level of production. The govern- domestic output. Temporary or selective subsidies ment finds it expensive to hold the stock it buys can help reduce government stocks of surplus and usually ends up selling it at less than cost, commodities. European pensioners have periodi- either at home or abroad. cally received slices of the EC's butter mountain. In the United States the federal Commodity In the United States, the CCC donated $2.5 billion Credit Corporation (CCC) "lends" cash to partici- in stockpiled commodities for domestic and for- pating farmers, using grain held in approved stor- eign distribution in 1985. Subsidies shield con- age facilities as collateral. Farmers may repay the sumers from the high prices paid to producers and loans, retrieve their crops, and sell them. Or they probably reduce the political costs of agricultural may turn the crops over to the CCC as repayment. price support. In Japan, the official aim of support- The loan ratethe price at which the CCC lends ing the price of rice is to ensure consumers ade- defines farmers' minimum prices. Because the quate quantities of reasonably priced rice. Once United States is the dominant grain exporter and the government decided on a policy of self- has few border measures to insulate its domestic sufficiency in ricebecause it feared the effects of prices from world trading prices, the CCC loan external shocksconsumer subsidies became nec- rate establishes a floor price in the world grain essary. Japanese consumer food subsidies cost markets. This means that when CCC stocks are about $3.5 billion a year. large, as they have been in the 1980s, the world market price is fixed in dollar terms by the loan Other measures rate, and this rate together with the value of the dollar determines the border prices facing other Other policy instruments exist. Some countries countries. Consequently, problems were created have state monopolies on imports, exports, or do- for many grain-trading countries when, in 1986, mestic purchases, and their actions generate many the loan rates for wheat and feed grains were cut of the effects of subsidies or border measures. by 25 to 30 percent at the same time that the dollar State marketing boards have been important for was weakening substantially. The reduction in the certain commodities in Canada, Australia, and support price for rice was even larger. New Zealand. The range of subsidies is wide: Since the mid-1970s, the United States has also transport (in Canada, see Box 6.4), insurance (in set a target price that is higher than the loan rate. Canada and the United States), fertilizers (in Aus- Deficiency payments make up the difference be- tralia), water (in the United States), and income tax tween market and target prices. In and of them- concessions (in France, Italy, the United Kingdom, selves, such payments would encourage produc- and the United States). Tax breaks are estimated to tion and hence drive down domestic and world have accounted for almost 20 percent of recent cap- prices. But this result is forestalled because farmers ital goods investment in U.S. agriculture. must participate in acreage reduction schemes in order to receive payments. Deficiency payments The domestic gains and losses for corn came to 48C a bushel in 1985more than from agricultural policies 20 percent of the market price. The percentage is higher for wheat, rice, and cotton. These pay- Agricultural policies in industrial countries transfer ments are almost certain to rise even further in the income from consumers and taxpayers to farmers future as new U.S. legislation cuts loan rates and and landowners. They also reduce national income hence market prices. Deficiency payments are of- in several ways. Subsidies cause farmers to use ten defended on the grounds that they help inputs inefficiently. Artificially high food prices farmers who are in financial trouble. But in the mislead producers into using too many resources 119 Box 6.4 Hidden subsidies: the Crow's Nest rates Not all export subsidies draw directly on the public lumber and coal (which have to pay excess transport purse, and those that do not can be very long-lived. In costs) and agroprocessing and livestock (which have to 1897 the Canadian government subsidized the build- pay higher grain prices). As an implicit tax on the rail- ing of a railroad through the Crow's Nest Pass of the roads, the subsidy has also led to substantial underin- Rocky Mountains. In return, the railroads agreed to vestment in rail facilities, which hinders all economic freeze their freight rates for transporting wheat and activity in the Prairie provinces. Finally, it has caused coarse grains from the Prairie provinces to the ports for additional distortions elsewhere in the economy. To export. compensate eastern livestock farmers for the effects of By 1981-82, it is estimated, farmers were paying only the Crow's Nest rates on domestic feed prices, further one-sixth of the cost of freight on grain exports. The subsidies were introduced to encourage the shipment railroador, rather, its other customerscontributed of feed grains from western Canada for domestic use in most of the remaining five-sixths. The subsidy the east. amounted to about $30 a ton, or about 15 percent of the Recently, the government has begun to reform the price of wheat and about 25 percent of the price of Crow's Nest system. It now pays the railroads $659 barley. The subsidy has raised grain and oilseed prices million a year plus a declining share of any increases in in the Prairie provinces, increased rents, and discour- freight rates. It is estimated that by 1990 farmers will be aged the development of alternative industries such as paying about half of the freight costs themselves. for producing foodresources which could be bet- be substantial because agriculture changes so ter used to produce something else. They also in- quickly. One indication of how much it can change duce consumers to purchase less food than they is the way nine EC countries converted themselves would otherwise. While accurate estimates of from net importers of 20 million tons of wheat a these effects are difficult to obtain, economists year to net exporters of 10 million tons between have amassed a body of evidence that presents a 1965 and 1983. Another is the development of strong case against such policies. This section re- sugar substitutes in the United States; the substi- views that evidence. tutes reduced sugar imports from 5 million tons (half of U.S. consumption) in 1981, to 3 million Net losses tons in 1982, to possibly 11/2 million tons in 1986. Much larger than the net costs of agricultural Table 6.4 summarizes some estimates of the do- support are the costs borne by consumers and tax- mestic real national income losses to industrial payers. Table 6.5 shows estimates of the compo- countries. The estimates differ in coverage, nents of the costs as well as the benefits that are method, and time, but they all show that agricul- reaped by producers. The figures are necessarily tural protection is expensive. Rice protection alone imprecise, but they give an indication of the mas- is estimated to have cost Japanese society $2.9 bil- sive volume of transfers involved. In every case, lion in 1980; in 1976 it cost about $3.9 bihion-0.6 producers gain less than consumers and taxpayers percent of Japan's GNP. The costs of the CAP to lose. The ratio of domestic losses to gains is ex- the EC were $15.4 billion in 1980, or 0.6 percent of pressed as the transfer ratiothe average loss to GDP. Even traditional agricultural producers were consumers and taxpayers per dollar transferred to not immune. Canada lost $400 million protecting producers. its dairy industry between 1976 and 1979, and the The high transfer ratio for Japan reflects high lev- United States lost almost $4 billion in total agricul- els of protection. Taxpayer costs, however, are tural support in 1984-85. lower for Japan. The United States and the EC These efficiency, or real income, losses are un- spend billions on payments to farmers and on derestimates because they omit administrative ex- export and domestic consumption subsidies, penses and ignore the distortions that high agricul- whereas Japan's import restrictions actually pro- tural prices cause in the long termsuch as the vide revenue through tariff collections. The U.S. diversion of fixed investment and research from policies cost less per dollar transferred because the industry to agriculture. The underestimation can relative price distortions are smaller. Also, since 120 U.S. output affects world market prices, part of the the main beneficiaries of price support are land- cost of the acreage controls is borne by foreign con- owners and quota holders; the poor bear a dispro- sumers. portionate share of the cost because they spend a The figures in Table 6.5 suggest that agricultural larger share of their income on food. protection is an expensive way of transferring in- The figures in Tables 6.4 and 6.5 indicate the re- come between various sections of society. In Ja- source wastes that could be avoided if trade were pan, consumers and taxpayers lost $2.58 for every liberalized. They show what countries would $1.00 transferred to producers, not including the gain-after all the effects have worked through the efficiency losses caused by taxes raised to pay farm economy-if they abolished their agricultural poli- subsidies. Furthermore, protection can transfer in- cies. In the short term, however, because land, come from the poor to the rich. In most countries capital, and labor would remain in farming, sup- Table 6.4 The domestic efficiency loss from agricultural intervention in selected industrial countries Efficiency loss (billions of Country or region and source Coverage Year 1980 dollars) Canada Josling 1981 Dairy products 1976-79 0.4 Barichello 1986 Wheat, barley, milk, poultry, eggs 1980 0.3 Harling 1983 Wheat, barley, oats, potatoes, beef, poultry, eggs 1976 0.1 Europe Bale and Lutz 1981 Wheat, maize, sugar, barley, beef 1976 1.9 Buckwell and others 1982b All CAP commodities 1980 15.4 Bureau of Agricultural Economics (Australia) 1985b All CAP commodities 1978 9.4 Bureau of Agricultural Economics (Australia) 1985' All CAP commodities 1983 6.7 Tyers and Anderson (background paper)b Grains, meats, dairy products, sugar 1980-82 24.1 Japan Bale and Lutz 1981 Wheat, barley, sugar, beef, rice 1976 6.0 Otsuka and Hayami 1985 Rice 1980 2.9 Tyers and Anderson (background paper) Grains, meats, dairy products, sugar 1980-82 27.4 United States Rosine and Helmberger 1974 All commodities 1970-71 5.5 Gardner, "Economic Consequences" Grains, dairy products, sugar, cotton, tobacco, 1984-85 3.9 (background paper) peanuts Johnson, Womack, and others 1985 Grains, soybeans, cotton 1981-84 0.3 a. Data are for France, Germany, and the United Kingdom. b. Data are for the EC, excluding Greece, Portugal, and Spain. c. Data are for the EC, excluding Portugal and Spain. Table 6.5 The annual domestic costs and benefits of agricultural protection to consumers, taxpayers, and producers in the EC, Japan, and the United States (billions of dollars unless otherwise noted) Total Consumer Taxpayer Producer domestic Transfer Country and year costs + costs - benefits = costs ratio EC (1980) 34.6 11.5 30.7 15.4 1.50 Japan (1976) 7.1 -0.4 2.6 4.1 2.58 United States (1985) 5.7 10.3 11.6 4.4 1.38 a. Excludes Greece, Portugal, and Spain. Source: For the EC: Buckwefl and others 1982; for Japan: Bate and Lutz 1981; for the United States: Gardner, "Economic Consequences" (background paper). 121 plies would be maintained even in the face of Spending is also significant in the United States changing policies. As a result, prices would be de- and Japan. The U.S. government's costs were pressed more in the short term than in the long $11.9 billion in 1984 (up from about $3.0 billion in term. 1980 and 1981). They are likely to rise to $20 billion a year in 1986-88 under the newly enacted Food Long-term issues Security Act of 1985. In Japan, the total agriculture, fisheries, and forestry budget was $14.7 billion in One argument in favor of supporting agricultural 1984, of which $3.4 billion was devoted to food prices is that it stimulates agricultural technology subsidies. This, however, represents a fall from and boosts crop yields. Indeed, it does. But higher 1980. yields reflect gains which only partly offset the cost The benefits from all this spending are question- of inputs such as fertilizers, oil, and pesticides. able. The main aim is to raise farmers' incomes and Investment in agriculture draws skilled manpower keep them from fluctuating. Some stability has and sophisticated equipment away from other sec- probably been achieved, but it is doubtful that tors of the economy. These resources could be high product prices have raised farm incomes in used more efficiently elsewhere. Investment that the long term, although the rental value and price generates ever more output of a product that al- of land have been supported. ready costs more than it is worth is not progress. There are problems in assessing the effect of ag- Agricultural intervention also places heavy bur- ricultural policies on farmers' incomes. In many dens on most countries' treasuries. Indeed, soar- industrial countries, figures on farmers' incomes ing budget costs in the mid-1980s provide the main are unreliable or unavailable. Rising prices tend to impetus for agricultural reform. In the EC, agricul- raise incomes in the short term, so their long-term tural spending accounts for around 70 percent of effects are obscured by the constant stream of new the total community budget. Of the ECU 18.6 bil- policies. Because the policies depend in part on lion ($23.5 billion) spent on price supports in 1984, farmers' incomes, it is difficult to distinguish be- about ECU 1.9 billion was raised from customs du- tween cause and effect. ties and levies on agricultural imports; the rest was The evidence available does not inspire confi- met from general taxes. As recently as 1974, agri- dence that commodity policies can solve farmers' cultural spending was only ECU 4.7 billion ($5.6 economic problems. Price supports and payments billion), of which ECU 3.0 billion was raised from have been ineffective in halting the rise in farm agricultural levies. So the increase both in spend- failures that has occurred since 1981 in the United ing and in the burden placed on general taxation States, and unprotected commodity producers has been great. have fared no worse than protected ones. The start Box 6.5 Old wine in new bottles The arguments in this chapter about the relation be- causes a pernicious distribution of the general funds of tween commodity prices and returns to land are far the societyit bribes a manufacturer to commence or from new. They date back to the English economist continue in a comparatively less profitable employ- David Ricardo, who was one of the first to analyze ment. It is the worst species of taxation, for it does not formally the benefits of free trade. His arguments give to the foreign country all that it takes away from against the early-nineteenth-century form of agricul- the home country, the balance of loss being made up tural protection, Britain's so-called Corn Laws, are as by the less advantageous distribution of the general relevant today as they ever were: capital" (ibid., p. 210). "[The price of] corn is not high because a rent is "The market price of corn would, under an in- paid, but a rent is paid because corn is high" (Ricardo creased demand from the effects of [an export] bounty [1817] 1973, p. 38). be raised. By a continued bounty, therefore, on the "The sole effect of high duties on the importation, exportation of corn, there would be created a tendency either of manufactures or of corn, or of a bounty on to a permanent rise in the price of corn, and this, as I their exportation, is to divert a portion of capital to an have shown elsewhere, never fails to raise rent" (ibid., employment which it would not naturally seek. It p. 209). 122 of the EC's cereal regime in 1967-68 cut average Figure 6.2 Nominal protection coefficients and agricultural prices in Germany by 8 percent, but the income differential in selected industrial farm profits per family worker rose. So did the countries, 1980 value added by each farm worker compared with the value added elsewhere in the economy. Figure Income differential' 6.2 plots rates of protection against GDP per capita 110 in agriculture in relation to other sectors. It shows ., New Zealand an inverse relationshipthe higher the protection, Australia 80 Netherlands the lower the relative income. Because of differ- ruted States Canada United Kingdom ences in farm size, the extent of part-time farming, and other factors, the plotted relationship cannot Denmark L Sweden demonstrate any causal connection. But it pro- 40 France Italy vides no support for the idea that it is better for a Germany Japan country's farmers to have highly protected com- modity markets. In general, there is no reason to expect higher 0 protection to be associated with higher farm 0.9 10 1.1 1.3 1.5 1.7 1.9 incomesa point made effectively by David Ri- Nominal protection coefficient cardo many years ago (see Box 6.5). Box 6.6 illus- a. GDP per head of work force in agriculture as a percentage of trates how extra revenues from higher farm prices GDP per head of work force in the whole economy. Source: Based on Anderson, Hayami, and Honma 1986 and are lost to rising land prices and rents as farmers OECD data. bid against one another to acquire the means to produce goods that can be sold at high prices. The price rises cause a windfall gain for those lucky enough to own land when the programs are intro- sufficiency contributes nothing to the quest for rea- duced, but become a component of costs for those sonable prices, for it increases the total cost of who enter farming later. In any case, agriculture food. accounts for only a small proportion of GDP in The argument that self-sufficiency contributes to industrial countries, and thus, in the long run, food security sounds simple, but it is not. Indus- rates of return in agriculture are largely set by trial countries need never go short of food because other parts of the economy. of crop failure, since they can always afford to buy In the United States, net farm income as a pro- enough on world markets. The argument for eco- portion of farmers' total income fell from 58 per- nomic security hinges on costand it seems likely cent in 1960 to 36 percent in 1982. In Japan, where that it would be cheaper in the long run to pay small-scale farming is more important, farm high scarcity prices even as often as one year in households derived 75 percent of their income five than to pay relatively high prices every year. from nonfarm sources in 1980. Furthermore, the As shown in Chapter 1, the long-term trend of real families of part-time farmers with permanent jobs world market prices is downward, not upward. outside farming were approximately 25 percent What about so-called strategic securitythe abil- better off than families with one or more full-time ity to produce food in times of political turmoil? It farm workers. would take a worldwide crisis to make food unob- Many countries say agricultural self-sufficiency tainable from any source. After all, the U.S.S.R. is an aimand an outcomeof their agricultural managed to purchase a record quantity of imports support programs. Self-sufficiency is supposed to despite the U.S. grain embargo in 1980. Such a contribute to food security, stabilize food prices, crisis would also stop the inputsoil, fertilizers, and, occasionally (and perversely), make prices pesticideson which the present high levels of reasonable. None of these arguments is sound. output in Europe and Japan depend. The goal of Take price stability. There is no doubt that the strategic security is illusory. variable levies in Europe and the fixed intervention prices in Japan do stabilize consumer and producer International consequences prices. But self-sufficiency is not necessary to achieve this. Variable levies and subsidies could Industrial countries' agricultural policies may be achieve the same effect at lower average prices aimed at solving domestic problems, but their ef- without boosting domestic production. Self- fects spill over onto the rest of the world. By ex- 123 panding output and depressing domestic demand, eralization. But this need not be so if they liberalize their policies reduce world prices and distort the their domestic policies and allow domestic produc- relative prices of agricultural and manufactured tion to substitute for imports. Moreover, some de- goods. By granting special trading privileges to veloping countries would be able to increase their remedy some of the harm, industrial countries can exports or become exporters for the first time. make matters worse. And by destabilizing interna- The rate of protection varies among agricultural tional markets, their farm policies can amplify products. So protection not only depresses the rather than dampen commodity price fluctuations. overall level of world prices, but also distorts rela- This section quantifies these effects using the tive prices among agricultural products. Prices for results of recent studies that look at what would the most highly protected productsdairy prod- happen to trade if the policies were liberalized. ucts, beef, and sugarare depressed more than prices of other agricultural products. These dis- Supply and price effects torted prices make the use of resources in world agriculture even less efficient. If Japan were to re- How much agricultural policies in industrial coun- duce its protection of rice of the varieties in which tries depress world prices depends on four things: other Asian countries have a comparative advan- the level of protection, the extent to which domes- tage, they could produce more. Until recently, tic surpluses lead to reduced imports or subsidized farmers in the Netherlands produced vegetables in exports, the share of world output and consump- greenhouses because energy costs were subsi- tion accounted for by the industrial countries, and dized. This discouraged Mediterranean countries the responsiveness of supply and demand to price from exploiting their natural advantages in these changes in the world markets. products. Agricultural prices and costs are the key to the Differing rates of protection hit developing coun- profitability of investment in agriculture. In indus- tries especially hard when the rate of protection is trial countries, resources are diverted from other higher for processed agricultural products than for sectors to agriculture. In developing countries, unprocessed ones. Tariffs in industrial countries which face low world prices for agricultural prod- are higher for wheat flour, pasta, cheese, and poul- ucts but nonetheless tax domestic production, re- try than they are for wheat, milk, or feed grains sources are diverted from agriculture to industry. (see Box 6.7). As a result, industrial countries ex- As a result, agricultural production is favored in port larger quantities, and import smaller quanti- industrial countries, even though in some of them ties, of processed goods than of the related raw the costs of production are higher than in many materials. The EC accounts for 11.4 percent of developing countries. This makes developing world wheat exports but 48.9 percent of wheat countries export less and import more, even flour exports. though they could becomeif they are not alreadyefficient producers by making invest- Subsidies and trade preferences ments to acquire the necessary technology. The longer agricultural protection is maintained in in- Some industrial countries have to give subsidies to dustrial countries, the more damaging it will be to sell crops on world markets. Developing countries' the world economy. competitiveness, therefore, depends less on their The impact of agricultural protection differs from own efficiency than on political decisions in indus- one developing country to another. It depends on trial countries. And their ability to compete may be whether the country is a net importer or exporter undermined at any time by increased export subsi- of each product. Exporters of commodities that are dies on industrial countries' exports. Even when in surplus in the industrial countries are most vul- industrial countries appear to provide developing nerable. Thailand, which is heavily dependent on ones with market opportunities, the gains may not exports of rice, has been severely threatened by last. High grain prices in the EC created new mar- the recent cut in the U.S. export price of rice. To kets for feed grain substitutes such as cassava, reduce its surpluses, the United States slashed the corn gluten feed, and citrus pellets. But China, In- price almost in halffrom $8.00 a hundredweight donesia, and Thailand, which produce cassava, in 1985 to about $4.20 as of mid-April 1986. In con- had to sign "voluntary" export restraint agree- trast, net food importers benefit from the low ments. world prices caused by current policies, and at first When a high-cost importing country becomes an sight it may appear that they would lose from lib- exporter, potential gains from trade are wasted. 125 The losses are often made worse by the special which produce an exportable surplus of a crop trade preferences that industrial countries grant to have to import it under the trade preference developing ones in the hope of mitigating these scheme. The EC imports dairy products from New distortions. In some cases, industrial countries Zealand and beef from some African, Caribbean, Box 6.7 Protection and agroprocessing Most goods are not purchased in their raw form but go percent (soybean oil), 1,050 percent (coconut oil), 165 through several stages of processing. International percent (corn milling), and 102 percent (flour). trade can occur at any stage, so the location of particu- By blocking this first and most natural step toward lar activities is an important issue. industrialization, escalating protection on agroprocess- In some cases, transport costs and technology deter- ing severely disrupts the process of development. De- mine location. The dilution and bottling of concen- veloping countries often respond by subsidizing local trated soft drinks take place near the final point of sale processing industries. Almost inevitably, this encour- to economize on transport costs. For the same reason, ages inefficiency and compounds the direct harm aris- cassava is converted into pellets in its country of origin ing from industrial countries' tariffs. before export. In many cases, however, the best place to locate a processing industry depends on a wide range of production costs. For labor-intensive indus- Box table 6.7 Tariffs and nontariff barriers tries in particular, developing countries should be well in industrial countries represented among processing countries. Yet this is Average Percentage of much less the case than might be expected. Product and tariff rates' imports subject An important reason is the pattern of industrial stage of prod uction (percent) to NTBS5 countries' protection. Industrial countries have escalat- Fish ing tariffs for most goodsthat is, tariffs are higher on Stage 1: fresh 3.5 35 more highly processed forms of a good. For many agri- Stage 2: prepared 5.5 31 cultural goods, the higher tariffs are buttressed by a Vegetables wide array of nontariff barriers. As goods become Stage 1: fresh or dried 8.9 39 more highly processedand embody more labor and Stage 2: prepared 12.4 48 capital servicesdeveloping countries face increasing Fruit barriers to sales in the world's major markets. Box ta- Stage 1: fresh 4.8 20 ble 6.7 illustrates tariff and nontariff barriers on a range Stage 2: prepared 14.4 54 Coffee of products imported by industrial countries. Stage 1: green, roasted 6.8 11 Even apparently mild escalation can severely disad- Stage 2: processed 9.4 17 vantage developing countries that try to establish a Cocoa processing industry. Suppose that 70 percent of the Stage 1: beans 2.6 0 cost of processed leather is accounted for by the raw- Stage 2: processed 4.3 0 hides and that all countries can purchase hides at the Stage 3: chocolate 11.8 14 same price on world markets. A developing-country Oils producer making leather worth $1.00 on the world Stage 1: seeds 2.7 33 market earns $0.30, out of which he must pay for labor Stage 2: fixed vegetable oils 8.1 56 and capital and retain profits. Now consider an Tobacco Stage 1: unmanufactured 55.8 11 industrial-country producer protected by a tariff bar- Stage 2: manufactured 81.8 22 rier of 4 percent. The same leather worth $1.00 on Rubber world markets sells for $1.04 domestically. So he earns Stage 1: natural 2.3 0 $0.34, or 13.3 percent more than the producer in the Stage 2: processed 2.9 6 developing country. That is, the developing-country Stage 3: rubber articles 6.7 14 producer has to be 13.3 percent more efficient than the Leather domestic producer if he is to sell in the industrial coun- Stage 1: rawhide and skin 0.0 0 try. Economists refer to this 13.3 percentthe extent to Stage 2: processed 4.2 13 which value added behind the tariff wall exceeds value Stage 3: leather articles added at world pricesas the effective rate of prote- and footwear 9.6 26 tion. Data are for Australia, Austria, Canada, the EC (excluding Greece, Portugal, and Spain), Finland. Japan, New Zealand, Nor- The degrees of escalation in the table often exceed 4 way, Sweden, and Switzerland. percent, so rates of effective protection can be very Data are for Australia, Austria, Canada, the EC (excluding Greece, Portugal, and Spain), Finland, Israel, Japan, New Zealand, high. In an extreme case, that of Sweden in 1969-70, Norway, Sweden, Switzerland, and the United States. effective rates of protection have been as high as 1,480 Source: Yeats 1981 and UNCTAD data. 126 and Pacific countries. These trade flows raise in- come in the exporting countries which are part of Figure 6.3 Per capita feed utilization and maize prices in selected industrial regions, the preference scheme, but importers and poten- 1960-84 tial exporters outside the scheme suffer greater losses. Increases in production costs and transport Feed utilization Price of maize (tons per capita) (dollars per ton) and other marketing costs account for the net 800 220 worldwide loss. World price (right scale) Destabilization of world markets 600 190 Most industrial countries hold domestic consumer prices relatively constant when world market prices change. A shortfall in world output will not affect demand in a country which insulates its do- 400 160 mestic markets. But someone's consumption must be reduced. And if some countries refuse to cut their consumption, others must reduce theirs dis- proportionately. To ration the world output, world 200 130 prices have to rise by more. If meat consumption and demand for feed grains were allowed to change with world market prices, cereal prices would fluctuate lessthus reducing the risk of 100 0 food shortages in developing countries. Figure 6.3 shows that among major industrial countries only 1960 1965 1970 1975 1980 1984 the United States reduced per capita feed con- Key for left scale: sumption significantly when prices soared in 1974- - EC United States 75. Consumption in the EC, in other industrial -Japan East European nonmarket economies countries, and in the East European nonmarket Source: USDA 1985d. economies hardly changed. The price changes caused by sudden supply or demand shocks can be absorbed by commodity stockpiles. Chapter 7 looks at attempts to coordi- of public stockpiles according to how much money nate stockpiling policies internationally. But na- is available from the budget or in response to other tional stockpiles are no less influential. In theory, political pressures rather than by the size of stock- world prices could be stabilized even if most coun- pile needed for stabilization purposes. In the mid- tries insulated their markets, as long as countries 1970s some countries built up stocks when they or private individuals that operated on the free should have been releasing them, and this made market held big enough stocks. But the more coun- the world food crisis worse. In June 1973, after tries insulate their economies, the greater the size world wheat prices had almost doubled in twelve of the stockpiles needed. One study of fourteen months, wheat stocks were estimated to have risen regions found that stocks had to be eight times by 2.0 million tons in the U.S.S.R. and by 0.2 mil- larger if the regions completely insulated their lion tons in Japan. By the following June, when economies than if they allowed free trade. The cost prices had increased by an additional 30 percent, of the extra stocks indicates one source of gain stocks in the EC and the U.S.S.R. had increased by from liberalization. For crops that can be grown an additional 0.3 and 14.0 million tons, respec- under a wide variety of conditions at similar costs, tively. Even wheat exporters increased their important gains from trade arise from temporary stocks: Canada by 0.2 million tons and Australia trade flows as each country's yield varies frqm by 1.4 million tons between 1972-73 and 1973-74. year to year. Policies that insulate domestic mar- kets sacrifice these gains. Counting the costs of protection Decisions to build up or release stocks are often made not by private traders but by governments. Because of the distortions in every trading coun- As in developing countries (see Chapter 5), gov- try, the whole world would be better off if indus- ernments in industrial countries determine the size trial countries were to stop protecting their farmers 127 Table 6.6 Changes in export revenue, import costs, and efficiency gains for selected commodities of developing countries caused by a 50 percent decrease in OECD tariff rates, 1975-77 (millions of 1980 dollars) Absolute increase All Middle- and developing Low-income high-income Commodity countries countries countries Change in export revenue Sugar 2,108 394 1,714 Beverages and tobacco 686 191 495 Meats 655 33 620 Coffee 540 123 417 Vegetable oils 400 60 339 Cocoa 287 21 265 Temperate-zone fruits and vegetables 197 60 137 Oilseeds and oil nuts 109 19 90 Other commodities 883 96 788 Total increase for all exports 5,866 998 4,867 Change in import costs Cereals 876 530 345 Other commodities 497 152 345 Total increase for all imports 1,373 683 690 Memo item: efficiency gains 922 4 926 Note: As explained in Chapter 4, efficiency gains are estimates of the increase in the net sum of producer and consumer gains and losses, adjusted for tax revenue changes; they are not measures of the difference between the increases in export revenues and import costs. Results of further work on a later period reported by Zietz and Valdes (1985) for sugar and beef indicate somewhat larger gains in export revenue than shown here. a. Includes developing countries with populations of more than 4 million in mid-1985. Source: Valdes and Zietz 1980, pp. 31, 47. and liberalize agricultural trade. But by how cent higher, cocoa paste cake 11 percent, and cocoa much? Recent studies have made some progress in butter oil 9 percent. Losses would have occurred quantifying the gains from liberalization. from higher prices of imported temperate-zone The effects of trade and policy liberalization can crops, especially cereals. But increases in export be observed when trade or domestic policies are revenue would have more than compensated for liberalized. Unfortunately, liberalization experi- such losses. Valdes and Zietz estimated that prices ments are rare. Estimates of multilateral or global of most tropical products would have gone up liberalization can be made only with the aid of sim- more than the price of wheat, the most important ulation models. agricultural import of developing countries. These Table 6.6 shows the results of a study by Valdes estimates ignore certain nontariff barriers to trade. and Zietz. They asked what would have happened They also omit other important long-term effects. to developing countries if the OECD countries had Liberalizing agricultural policies of industrial coun- cut their tariffs on ninety-nine commodities by 50 tries would encourage outward-oriented policies percent. The study is based on figures for 1975-77. in developing countries, stimulate investment and According to Valdes and Zietz, developing coun- research in agriculture, and increase the export po- tries' income would have increased by $922 million tential of tropical products by more than the fig- in 1977 and their export revenues by almost $6 ures in Table 6.6 suggest. It is also likely that, be- billion. Total export revenue would have risen by cause of cost advantages, some developing 11.0 percent; exports of low-income countries countries would become exporters of commodities would have risen by 8.5 percent. Because protec- that they import under current policies of the in- tion in the OECD countries has increased since dustrial countries. The estimates, therefore, proba- 1977, the benefits of liberalization would be sub- bly represent the minimum benefits of liberaliza- stantially greater in 1985. tion. Developing countries' gains would have arisen Because policies interact, it is difficult to judge mainly from increases in the prices of tropical ex- what would happen across the world as a result of ports. The price of roasted coffee would have been liberalization by groups of countries. European 10.8 percent higher, that of coffee extracts 6.4 per- and Japanese policies tend to reduce world prices 128 of wheat and rice; the acreage control policies of by both industrial and developing countries. Al- the United States have tended to increase them. It though Tyers and Anderson cover only the main is possible that the policies could offset one an- temperate-zone commoditiesand thus omit the other so that industrial countries would lose while most important sources of gains to developing the trade of developing countries remained rela- countriesthey nevertheless throw light on im- tively unaffected. But if the policies of industrial portant aspects of trade and policy liberalization. countries reinforced one another (as in sugar and Qualitatively similar results were also obtained in a dairy products), the consequences for developing study of free trade in agriculture carried out at the countries would be more dramatic. International Institute for Applied Systems Analy- Interactions between commodities are also im- sis. portant. Industrial countries do not, on the whole, Table 6.7 shows what Tyers and Anderson esti- intervene in markets for vegetable oils (such as mate would happen to world prices and trade un- palm oil or coconut oil). But these may still be de- der several scenarios: unilateral liberalization by pressed by industrial countries' policies in other the EC, Japan, and the United States; multilateral markets. The EC's feed grain policies increase de- liberalization by all industrial countries and by all mand for feed grain substitutes, such as soybean developing countries; and global liberalization. All meal. This helps oilseed exporters such as Argen- the simulations indicate that the volume of world tina, Brazil, and the United States. But because trade in the group of commodities studied would meal and soybean oil are joint products, these poli- rise, although cross-price effects would entail small cies also affect the oil markets. Similarly, U.S. reductions for a few individual commodities. Uni- grain price supports and acreage controls encour- lateral liberalization by the EC would reduce world age production of soybeans, which is not con- trade in sugar because both its subsidized exports trolled. Thus, as a by-product of industrial coun- and its preferential imports would end. tries' policies, soybean production is encouraged, Most of the projections indicate that world prices which depresses the world price of vegetable oils, would rise. There are two exceptions: U.S. liberali- which harms export earnings of developing coun- zation, which would reduce world prices slightly tries from palm oil and coconut oil. because ending acreage controls would increase Estimates of liberalization can reflect the com- output of grains and rice; and developing-country plexities of world markets by focusing on the con- liberalization of rice and some livestock products, nections between commodity markets. That is which would reduce world prices by ending the what a study by Tyers and Anderson does (see Box taxation of domestic producers that currently 6.8). They simulated the effects of unilateral trade holds down production. liberalization by individual countries or groups of Developing countries face higher import prices countries as well as of simultaneous liberalization when industrial countries liberalize. As a result, Table 6.7 International price and trade effects of liberalization of selected commodity markets, 1985 Country or country group in which Coarse Beef and Pork and Dairy liberalization takes place Wheat grains Rice lamb poultry products Sugar Percentage change in international price level following liberalization EC 1 3 1 10 2 12 3 Japan 0 0 4 4 1 3 1 United States 1 3 0 0 1 5 1 OECD 2 1 5 16 2 27 5 Developing countries 7 3 12 0 4 36 3 All market economies 9 4 8 16 2 67 8 Percentage change in world trade volume following liberalization EC 0 4 0 107 3 34 5 Japan 0 3 30 57 8 28 1 United States 0 14 2 14 7 50 3 OECD 19 32 195 18 95 2 Developing countries 7 12 75 68 260 330 60 All market economies 6 30 97 235 295 190 60 Note: Data are based on the removal of the rates of protection in effect in 1980-82. Data for the EC exclude Greece, Portugal, and Spain. Source: Tyers and Anderson (background paper). 129 Box 6.8 Simulation of liberalized agricultural policies A study by Tyers and Anderson constructs a model for available and the most thorough analysis possible. simulating the effects of lowering trade barriers. It rep- Changes in protection since the model's 1980-82 resents the world agricultural economy as a system of base. supply and demand equations for seven commodity The differences between behavior in the long groups in thirty countries or groups of countries. The runwhen investment and research effort can be redi- commodities are wheat, coarse grains, rice, beef and rected and technology changedand the medium- Iamb, pork and poultry, dairy products, and sugar. term estimates of behavior in the model. The effects of tariff and nontariff barriers are repre- The importance of the fact that the model's cover- sented by nominal protection coefficients for each com- age is limited, since it ignores tropical agriculture and modity, measured over the period 1980-82 (see Table all nonagricultural activities and income. 6.1). The accuracy of the model's assumptions about To solve the model, a computer finds a set of interna- how countries whose liberalization is not being consid- tional prices at which world supply and demand for ered would react to their neighbors' liberalization. each commodity balance and a set of domestic prices at This list suggests that the model's results will be which each country's own markets clear. The effects of very imprecise. It does not, however, undermine the liberalization can be worked out by solving the model basic messages of the text. Indeed, the quoted figures twice: first by assuming current agricultural policies will almost certainly be underestimates of the benefits and then by assuming that the trade barriers and do- of trade liberalization to developing countries for the mestic interventions have been removed. The differ- following reasons: ences in prices represent the effects of liberalization. Current protection coefficients in industrial coun- Once the prices are known, trade flows and transfers tries exceed those of 1980-82. of income can be calculated for each country and com- In the long run, higher prices will stimulate invest- modity. ment and research in developing countries' agricul- The Tyers and Anderson model can allow for ran- ture. dom shocks to represent such factors as weather and Unshackling agriculture will stimulate savings, disease. Under both assumptionsactual trade policy growth, and efficiency throughout agriculturally de- and liberalizationthe model is solved 100 times using pendent economies. a specified series of shocks. These experiments suggest If developing countries' export goods were liberal- how different policy regimes cope with an uncertain ized as well as their (temperate-zone) import goods, world. trade expansion would occur. Results of this model are reported in Tables 6.7 and If developing countries exploit the opportunities 6.8 in the text. Their relevance to the assessment of the that industrial-country liberalization would grant long-term effects of liberalization in 1986 depends on a them, by deregulating their own agriculture, signifi- number of factors: cant supply expansion would be feasible. The accuracy of the estimates of protection and the Overall, therefore, while the computer model is no responses of supply and demand to changes in prices. substitute for economic analysis of observed policy ex- While these can never be known with certainty, the periments, its estimates of the benefits of trade liberali- estimates used here are based on the most recent data zation indicate the strong advantages of such a policy. they import less and export more. Because imports they liberalized their own agricultural policies exceed exports, the simulated higher prices yield a along with the industrial countries. net loss (estimated at $11.8 billion in Table 6.8) to In the Tyers and Anderson study, liberalization consumers and producers. The implication that by developing countries means the removal of dis- developing countries lose is misleading for three tortions in border prices by sixteen individual and reasons. First, the study looks at temperate-zone four regional groups of developing countries and crops, of which developing countries are the main no overvaluations of the exchange rates. The importers. If tropical products were to be included, results (see Table 6.7) are that the world price of we would expect to see a substantially different rice would fall 12 percent, while prices of grain, story, as Valdes and Zietz did. Second, under free sugar, and dairy products would rise. The grain trade some developing countries might, in the and dairy prices would rise because the main de- long run, become exporters of these products. veloping countries in the study were importers of Third, even Tyers and Anderson's study shows these products and they maintained internal prices that developing countries could gain $18.3 billion if above world prices. Ending this protection would 130 Table 6.8 Efficiency gains caused by liberalization of selected commodities, by country group, 1985 (billions of 1980 dollars) Industrial- Developing- Industrial- and country country developing-country Country group liberalization liberalization liberalization Developing countries -11.8 28.2 18.3 Industrial market economies 48.5 -10.2 45.9 East European nonmarket economies -11.1 -13.1 -23.1 Worldwide 25.6 4.9 41.1 Note: Data are based on the removal of the rates of protection in effect in 1980-82. Source: Tyers and Anderson (background paper). increase imports and hence prices. Liberalizing the more than double the level of official development grain policies of developing countries would have assistance from OECD countries. a bigger impact on prices than liberalization by the Losses to farmers would tend to be smaller if OECD countries because the OECD countries' countries liberalized together rather than on their grain policies tended to offset one another in the own. The reason is that the declines in producer period studied. prices would be less. Consider dairy products, one The projections show that the main beneficiaries of the most protected products in industrial coun- of unilateral liberalization are the liberalizers them- tries. Unilateral liberalization of the U.S. dairy pol- selves (see Table 6.8). Industrial countries would icy would push up world prices by 5 percent (see gain $48.5 billion if they liberalized unilaterally; de- Table 6.7). This would imply a cut in U.S. producer veloping countries would gain $28.2 billion if they prices of as much as 46 percent. But if all industrial did the same. But each imposes losses on the countries were to liberalize simultaneously, world other. If both groups liberalized, neither would dairy prices would rise 27 percent, and the U.S. gain quite as much individually, but the world producer price would have to fall only 24 percent. would be even better off. Indeed, if developing countries liberalized as well, So why do countries not tear down their agricul- the world price would rise above the former pro- tural policies? The reason, of course, is that the tected price. interest groups whose support the policies aim to The biggest gains from current policies accrue capture would lose. With OECD liberalization, the mainly to the East European nonmarket econo- overall gain to the industrial countries would be mies. They would be worse off by $11 billion if $48.5 billion. But this figure comprises a net gain of industrial countries liberalized, by $13 billion if de- $104.1 billion to OECD consumers and taxpayers veloping countries liberalized, and by $23 billion and a $55.6 billion loss to producers. with global liberalization. They would not reduce It is interesting to note that the OECD countries their imports as much as the developing countries, spent $27 billion annually during 1980-84 on offi- and they would have less scope for exporting cial development assistance. With global liberaliza- those goods whose prices would rise. tion, the industrial and developing countries Would prices become more volatile if agricultural would together gain about $64 billion annually- policies and trade were liberalized? Two recent Table 6.9 Effects of liberalization on price instability, 1985 Coefficient of variationa With With With Without industrial-country developing-country global market Commodity liberalization liberalization liberalization liberalization Wheat 0.45 0.30 0.23 0.10 Coarse grains 0.19 0.17 0.14 0.08 Rice 0.31 0.25 0.14 0.08 Beef and lamb 0.06 0.04 0.05 0.03 Pork and poultry 0.09 0.07 0.06 0.04 Dairy products 0.16 0.07 0.07 0.04 Sugar 0.20 0.17 0.07 0.04 a. The expected deviation from the long-term average price in any particular year as a percentage of the average price. Source: Tyers and Anderson (background paper). 131 studies indicate that liberalization would make of world consumption. This second study needs to prices more stable. According to one estimate, by be interpreted with more caution than usual: Schiff, the variability of world wheat prices could among other things, it assumes that internal prices be reduced by 48 percent if all countries were to in China and India would move in line with world end their protective wheat policies. A second prices. This seems unlikely, so consumption study found that liberalization by industrial coun- would not adjust fully to scarcity or abundance in tries would reduce the price variability of all the world markets. Nonetheless, the findings of the major temperate-zone commodities. The variabil- two studies, even if they exaggerate the impact of ity of wheat prices would fall by 33 percent and developing countries, confirm that liberalized that of sugar by 15 percent (see Table 6.9). Liberali- trade is more effective at price stabilization than zation by developing countries might stabilize even the most elaborate international commodity- prices even more, because these countries insulate stockpiling schemes. It is to those efforts that we their domestic markets to a greater extent than do turn in Chapter 7. some industrial ones; they also have a larger share 132 International initiatives in agricultural trade International cooperation in agricultural trade has International commodity agreements long been accepted as an effective means of foster- ing economic growth in developing countries. En- An international commodity agreement (ICA) is a thusiasm for cooperation has been dented, how- formal arrangement between the countries pro- ever, by the continued failure to liberalize ducing and consuming a commodity to control the agricultural trade and by the declining and volatile market for it in some respect. Some forty ICAs agricultural terms of trade faced by some develop- covering thirteen commodities have been con- ing countries. These factors have prompted a cluded since 1931. Although the details of their search for means other than unregulated commer- objectives have varied, virtually all have sought to cial trade to serve the interests of developing coun- stabilize as well as increase the price of the com- tries. modity concerned. Most have run into severe diffi- This chapter describes how these initiatives have culties. At the end of 1985 only four agreements affected the international trading system and as- capable of influencing prices were still in opera- sesses their record. The first section examines the tion, and only one of these was actively doing so. economics of commodity agreements and con- It is questionable whether any of them are effec- cludes that they have not lived up to expectations. tively stabilizing prices in 1986. The next section deals with schemes to compen- sate commodity producers for shortfalls in their Objectives and instruments export earnings. It concludes that such schemes involve certain practical difficulties but are more The precise purposes of ICAs differ from case to efficient than commodity agreements. The chapter case, but two overriding objectives are evident. then looks at attempts to improve developing First, to stabilize commodity prices. Second, to countries' access to the markets of industrial coun- ensure "fair," "remunerative," or "equitable" tries. These efforts have often taken the form of pricesthat is, generally to raise them. While the preferential treatment being granted to particular two aims are frequently combined, they are logi- groups of developing countriesan approach of cally quite separate and even potentially contradic- limited value because it can create additional dis- tory. They have different distributional implica- tortions of world trade and thus hurt other devel- tions and require different tools of policy. The two oping countries. The final section of the chapter main instruments of ICAs have been buffer stocks considers food aid. In emergencies, famine relief and controls on production or exports. has an obvious humanitarian role, and longer-term food aid can also be useful in special circum- BUFFER STOCKS. The problems with international stances However, since it can easily discourage buffer stocks are similar to the problems of run- local production of food, it needs to be offered only ning national buffer stocks discussed in Chapter 5. with careful consideration of the market conse- The basic questions to ask are, why they are desir- quences. able and how they can work? By buying a com- 133 modity when its price is low and selling it when other grades and other currencies will still face un- the price is high, a buffer stock manager behaves certainty. just like a profit-seeking speculator. In that case, Deciding the size of a buffer stock. It is impossible why should stabilization not be left to private spec- to guarantee that a buffer stock will never exhaust ulators? Why do governments need to undertake its stocks or its cash: there can always be runs of transactions that do not look attractive to private good (or bad) years. For the ICA to be credible, dealers? Three possible sets of reasons exist. First, however, the probability of exhaustion must be speculation might not always be stabilizing: by small. The optimum size of a stockpile depends on action or merely the threat of it, a buffer stock the tradeoff between the costs of holding it and the manager may be able to offset or discourage de- benefits of improved credibility. stabilizing speculation. Second, the buffer stock Taking account of the deterrent effect that buffer manager might have better information than pri- stocks have on private holders of stocks. It has been vate speculators and thus be able to push the mar- estimated that for every ton added to the United ket toward the long-run price more directly than States' stockpile of wheat between 1977 and 1982, they. The manager could have access to confiden- between half and three-quarters of a ton was with- tial material concerning plans for trading by cen- drawn from private stocks. Such withdrawals ob- trally planned countries, for example. Third, the viously offset much of the buffer stock's stabilizing buffer stock manager may have access to more or influence and add considerably to the strain on its cheaper capital than private traders. These advan- resources. tages would allow him to trade more, or on finer These difficulties do not rule out a buffer stock margins, and hence increase his power to stabilize operation, but they do reduce its chances for suc- prices. These arguments are largely hypothetical. cess. Against the possibility of success must be set Empirical studies have not found private specula- the known costs of running a buffer stock. These tion to be destabilizing. Nor does it appear that include the administrative expenses of the organi- inside information or access to capital provides zational units that negotiate and monitor the ICA, substantial advantage to public stabilization au- interest forgone on the value of physical stocks, thorities in practice. storage costs, physical wastage, and the interest Even if greater price stability than would result differential between the returns to long-term pro- from unregulated markets is deemed desirable, an ductive investment and the short-term interest international buffer stock would be a cost-effective that the buffer stock manager can earn on his un- means of achieving this only if it overcame several used liquid reserves. He can, of course, make serious difficulties in the following tasks: money by buying cheap and selling dear, but only Fixing the target range for prices. The narrower if the buffer stock is able to achieve its goals. Since the range, the greater the chance that it will be excess stocks have to be sold, potential profits of- breached. This possibility actually may precipitate ten turn out to be actual losses. fluctuations that would not occur in the absence of A basic problem with the buffer stock approach the buffer stock; the mere existence of a narrow is that it aims at stabilization of prices rather than range for target prices can encourage speculation of export earnings. If a country can offset fluctua- against the ceiling and floor, as well as reduce the tions in earnings by borrowing or by using re- level of private stocks that might be used to moder- serves, price instability in itself probably does little ate price changes outside the declared range. harm. Furthermore, stabilizing prices may not sta- Choosing the reference price on which the target bilize export earnings. This is easily seen by con- range is centered. Over the long run, buffer stocks sidering the case of weather-induced output vari- should stay the same size, and so their price range ation in which market forces lead the price of the must include the long-run market-clearing price. commodity to rise in the same proportion as quan- However, this price tends to change over time, tity falls. The value of trade will then remain con- which makes it hard for the buffer stock manager stant if prices are allowed to vary freely, whereas to know whether his current range will eventually price stabilization would destabilize earnings. exhaust his physical stocks on the one hand or his cash resources on the other. PRODUCTION AND EXPORT CONTROLS. The second Defining the price range with respect to both the objective of ICAsto raise commodity pricescan location and grade of the commodity and the currency of ultimately be achieved only with controls on pro- denomination. Even if the buffer stock stabilizes its duction. ICAs that adopt such controls basically chosen price perfectly, producers interested in act as producer cartels and face the well-known 134 problems that plague all cartels. An ICA will be their own. First, quotas tend to ossify the pattern ineffective if any significant suppliers remain out- of supply. Even if they are initially allocated to side it. It will fail to raise producers' earnings (as low-cost producers, thereby minimizing the opposed to prices) if the good can easily be re- worldwide costs of supplying a certain volume of a placed by other commodities, which would make commodity, they rarely continue to perform this the demand for it price responsive. And if it is to function as economic conditions change. Potential succeed, it will have to allocate quotas among pro- newcomers are prevented from entering markets ducers and police its restrictions. Even in the case even if they have a comparative advantage. Sec- of oil, which was thought to be the most promising ond, the decentralized administration of quotas candidate for cartelization, these problems have tends to produce "lumpy" stock movements. not been overcome. Once the market price rises to a point where coun- Few ICAs for agricultural products have tried to tries are allowed to increase exports, there is a control output with internationally negotiated pro- strong incentive to expand them rapidly before duction quotas: the early agreements on coffee controls are reimposed. Third, policing the agree- (1962) and cocoa (1972 and 1975) are perhaps the ments can be very difficult. most prominent examples. It has been more com- mon for producers to impose production quotas Assessment nationally so as to fulfill internationally agreed re- strictions on exports. Examples of these include For all the reasons discussed in this section, ICAs Brazilian coffee and set-asides for wheat in the have not been a success in practice. In recent years United States. Recently, however, export controls there have been four of them in agriculture have been supported more by national stockpiles coffee, cocoa, rubber, and sugarand one other in than by production limits. Thus, their overall effect tin. The main features of the agricultural ICAs are is similar to that of buffer stocks, for the ICA ar- summarized in Table 7.1 and their performance in rangements typically state that whenever the Figure 7.1. Box 7.1 discusses their recent experi- world price rises above some limit, export quotas ence in some detail. All of them except coffee face may be increased and national stocks run down. uncertain futures. Negotiations on cocoa and Unlike production quotas, therefore, export con- sugar have collapsed. Negotiations on rubber con- trols principally stabilize prices rather than raise tinue, but their future is uncertain. them. The prospects for ICAs are therefore bleak. Not Export controls are subject to the practical prob- only are specific agreements proving hard to op- lems already mentioned, as well as some more of erate and renegotiate, but much grander plans Table 7.1 Current international commodity agreements in agriculture Item Cocoa Coffee Rubber Sugar Date of first agreement 1972 1962 1980 1954 Date of current agreement 1981' 1983 1980 1978k Duration (number of years) 3 6 5 5 Extensions (number of years) 2 2 2 World trade (billions of dollars in 1984) 2.6 11.0 3.6 10.1 Percentage from developing countries 79 76 93 75 Percentage from low-income countries 14 16 6 2 Dependencyd 6 21 3 9 Principal instrument buffer export buffer export StOCJ( quota stock quota Permitted price range (percent) ± 18 ± 15 ± 20 ± 13 Buffer stock as a percentage of 1980-83 average consumption 16 15 Expires September 1986; negotiations on renewal were abandoned in spring 1986. Economic provisions expired December 1984. Extended for an indefinite period. Number of countries, based on a sample of eighty-eight, in which the commodity accounted for more than 10 percent of exports in 1980. Source: Gilbert 1984, tables 7.1(A) to (F). 135 Figure 7.1 International commodity agreements: price ranges and prices Box 7.1 Recent commodity agreements Cents per pound in agriculture 180 Cocoa The longest-lived agricultural ICA is the International Coffee Agreement. Based on export controls, it has 130 probably raised coffee prices slightly above what they Ceiling price would have been otherwise. Although in recent years Price range coffee prices have been kept mostly within the speci- Floor price fied ranges, the agreement has had little success in 70 stabilizing them over the long term. The agreement has been in operation for more than twenty years (with / a five-year hiatus in the mid-1970s). An important fac- tor in the ICA's longevity has been the support offered 10 to it by the main coffee-consuming countrieslargely for reasons of foreign policy. Periodic supply crises Cents per pound most of them caused by adverse weather conditions in 230 Brazil, such as the drought in 1985have also contrib- Coffee uted to its longevity, by permitting the release of stocks. Two serious problems have recently confronted the coffee agreement and are likely to recur when the cur- 150 rent supply crisis ends. First, the United States, the Market price largest consumer, has been reassessing its commit- ment to the agreement. Second, increasing amounts of 90 coffee have been traded outside the agreement's ex- port restrictions. The agreement permits nonquota salessmall volumes of exports allowed in addition to 30 normal export quota limits for the purpose of opening up new markets. Recently, however, the volume of Singapore cents per kilogram nonquota sales has been growing, and some of it has 310 270 for strengthening market interventions have not 210 been realized. The most prominent example was UNCTAD's proposal in 1976 for a common fund 150 within the Integrated Program for Commodities (IPC). This would have established common fi- nancing for agreements in ten leading commodi- 90 ties. The plan led to the ICAs on cocoa and rubber, 1960 1964 1968 1972 1976 1980 1984 but that was all. Cents per pound The argument for ICAs is that price fluctuations 30 Sugar and uncertainty are harmful. Rather than try (and 24 almost certainly fail) to eradicate price movements, it may be more useful to find ways of alleviating their effects. One obvious remedy is to encourage 16 traders to use forward, futures, and options mar- kets. Though their details vary, in general each allows a trader to negotiate the terms on which he 9 will trade in the future, and thus transfer the risks of price fluctuations to speculators in these mar- 0 kets. This reduces uncertainty and achieves basi- 1954 1958 1962 1966 1970 1974 1978 1982 cally the same result as a successful attempt to sta- Source: UNCTAD. bilize prices. In addition, each market participant can choose how much stability he wants (at the 136 been reexported from new markets to traditional gan in 1985 for a fourth cocoa agreement, old disagree- quota-bound ones. Although this may be efficient in ments resurfaced between producers, who want to the sense that it suits all the trading parties, it is not as charge $1.10 a kilogram, and consumers, who want to efficient as free trade in coffee would be, because it pay only $0.85 a kilogram. A plan to buttress the buffer increases transaction and transport costs and intro- stock with export controls was proposed, which duces unnecessary uncertainty. opened new areas of disagreement. The negotiations The international cocoa agreements have been al- have since been abandoned, at least temporarily. most wholly unsuccessful. The first cocoa agreement, The International Natural Rubber Agreement, hav- signed in 1972, was designed mainly to defend a floor ing successfully defended a floor price for several years price. Its advent coincided with a surge in prices that after it was set up in 1980, has been unable to divest resulted from declining output and booming demand. itself of its large stocks, despite cuts in its target prices. Thus, market prices exceeded target prices throughout The agreement was extended until 1987, although the the 1970s. Since the agreements had no accumulated decision to do so was made at the last minute, and it is stocks, they were powerless to hold down prices. unclear whether producers and consumers will be able Negotiations for the third cocoa agreement began in to agree to a further renewal. 1981 and proved protracted and difficult. Neither the Recent international sugar agreements have had no principal consumer (the United States) nor the princi- material influence on the world sugar price. The free pal supplier (Côte d'Ivoire) took part. The United market accounts for only about 15 percent of world States felt the target price range was too high; Côte sugar trade; the rest is shipped under long-term or d'Ivoire thought it was too low. Subsequent events preferential agreements. The result is that the free mar- bore out the U.S. view. Cocoa prices have fallen sub- ket price of sugar is the most volatile of all agricultural stantially since 1981 as new production, stimulated by commodity prices. The sugar agreement has had to previous high prices, has become available. During the cope with the EC's shift from being a major importer to third cocoa agreement, therefore, the market price has a major exporter: the EC refused to sign the 1977 sugar almost always been below the target range. The agree- agreement because it said its export quota was too low. ment's executive arm intervened to support the price, Market support operations were abandoned in 1984, but, lacking the support of the United States and Côte and the sugar agreement now merely collects data and d'Ivoire, was ineffective. In the negotiations which be- fosters discussions. going price) rather than having to accept the choice administer than commodities. It can also be easily of a buffer stock manager. The markets are not at extended to cover temporary rises in import prices, present suited to the needs of small commodity for example, or even increases in import require- producers, but they could be adapted and devel- ments when crops fail. oped (see Box 7.2). Individual countries have two potential sources of compensatory financing. First, they can accu- Compensatory finance mulate international reserves in good years and use them in bad ones. However, they thereby lose The main argument for stabilizing commodity the returns they would have'had if they had un- prices is that it stabilizes the export earnings of dertaken productive investments instead of hold- commodity producers and hence minimizes dis- ing liquid assets. Second, they could borrow on ruptive fluctuations in their imports, investment, private markets when their export earnings fall. and fiscal balances. The previous section showed The possible drawbacks of this approach are the that buffer stock policies could not be relied on to costs and difficulties of private borrowing, espe- stabilize prices over the medium term, and that cially for the poorest countries. Since both sources even if they could, they are expensive to operate are particularly difficult for developing countries to and do not necessarily stabilize export earnings. use, this group benefits most from official schemes This section examines an alternative approach of compensatory lending. borrowing to stabilize a country's financial situa- The two schemes currently in existence repre- tion when its export earnings are fluctuating. sent different approaches to compensatory financ- Compensatory borrowing offers a cheaper route to ing. The IMF's Compensatory Financing Facility stability because money is cheaper to store and (CFF), established in 1963, is designed to address 137 Box 7.2 Commodity futures and options Futures markets allow commodities to be bought and market denominated in local currency is an alternative sold today for delivery at a future date. Such markets that should be considered. exist in London, New York, Winnipeg, Sydney, and Many buyers and sellers do not wish to lock in a elsewhere, but the most widely used exchanges are in fixed price, because that forecloses potential gains as Chicago, where contracts for corn, soybeans, wheat, well as losses. Instead, sellers would like to insure cattle, and hogs are bought and sold for delivery up to themselves against extremely low prices, and buyers eighteen months from the trading date. Futures con- against extremely high prices. Such insurance can be tracts can be used to speculate on price, but they also accomplished by trading in options on futures con- allow buyers and sellers to fix a price for goods that are tracts. Options are traded on sugar and cotton in New to be purchased or sold later. Thus, the contracts can York and on soybeans, corn, hogs, and cattle in Chi- be used to transfer the risks of price fluctuations from cago. A farmer can insure against low prices by pur- risk-averse farmers to risk-seeking speculators. A chasing a "put" option to sell at a specified "strike" wheat farmer can sell wheat futures when he plants his price. If the actual price falls below the strike price, he wheat. Later, when the wheat is harvested, he can sell exercises the option; if the price rises above it, he loses the wheat and simultaneously buy the futures back. what he paid for the option but sells his crop for a The whole process, which is called hedging, is equiva- higher cash price. There are several strike prices below lent to a forward sale in that both determine the price the futures price, providing a range of insured price that the farmer receives at the time the crop is planted. levels. Similarly, a buyer insures against high prices by Similarly, by buying futures a processor of wheat can purchasing a "call" option to buy at a strike price of hedge anticipated purchases. his choice. The market price of options determines the Hedging via futures reduces, but does not eliminate, cost of the insurance. risk. If a farmer sells forward 1,000 tons of wheat and The usefulness of international futures and options then his crop fails, he may have to buy at high prices to markets for developing countries is greatly reduced be- meet the commitments of his futures contract. Futures cause of basis risk. The alternative of a local futures purchases can backfire in similar ways. In developing market may be viable, but it requires active speculators countries serious problems can arise for farmers when to whom hedgers may transfer risk. In addition, a sta- the local price does not vary consistently with the Chi- ble financial and regulatory environment is needed if cago price or the price in other futures markets because futures markets are to thrive. Although farmers, cor- of such factors as exchange rate fluctuations and porations, and parastatal agencies in developing coun- changes in government policies: the possibility of this tries have made little use of futures and options, the happening is known as basis risk. A futures sale in opportunities for their use have been expanding. They Chicago will do a producer little good if the local price may become important, especially if liberalized agricul- falls in comparison with the Chicago price. When this tural trade ties the world's agricultural commodity problem is serious, the development of a local futures markets even more closely together. the adverse effects on a country's overall balance falls that are temporary and due largely to factors of payments of a shortfall in its total export earn- beyond the member's control" (International ings. The EC's export earnings stabilization Monetary Fund 1984b, p. 47). The facility is open scheme (STABEX) is a commodity-specific arrange- to all IMF members, but since the conditions for its ment that provides compensation to individual use are more frequently met by countries that de- countries associated with the EC for shortfalls in pend heavily on trade in primary commodities, its their export earnings from individual agricultural use has, in practice, been largely confined to devel- commodities. Whereas a basic requirement for use oping countries. Coverage of the facility was ex- of the CFF is the existence of a balance of payments panded in 1981 to include cereal imports, but in problem, there is no such requirement under most instances the CFF has been used to make up STABEX. for shortfalls in merchandise exports. Eligibility to use the CFF is subject to certain cri- The IMF's Compensatory Financing Facility teria: (1) there must be a balance of payments need; (2) the export shortfall must be temporary The purpose of the CFF is "to provide financial and due to factors largely beyond the control of the assistance to members experiencing balance of member; and (3) the IMF must be convinced that payments difficulties resulting from export short- the member will cooperate with it in efforts to find 138 appropriate solutions for its balance of payments ECU 375 million ($460 million) was allocated for difficulties. In addition, for requests that have the the duration of the first convention (1975-79), ECU effect of raising outstanding CFF drawings above 550 million for the second (1980-84), and ECU 925 50 percent of quota (upper tranche), the IMF must million for the third (1985-89), with the funds in be satisfied that the member has already been co- each case divided evenly among the years con- operating with the IMF to find appropriate solu- cerned. tions for its balance of payments difficulties. All of Subject to the threshold limits discussed below, these judgments can be difficult in practice. compensable export shortfalls are calculated for A special provision relating to agriculture allows each commodity separatelythus excess exports countries to borrow when they face balance of pay- of one commodity do not offset shortfalls in ex- ments problems caused by increases in the cost of ports of another. The intention is that compen- their cereal imports owing to circumstances be- satory payments should be directed to producers yond their controlsuch as weather-induced de- of the shortfall commodities, and claimants of clines in domestic food supplies. Under the cereal STABEX funds must declare beforehand how they decision the amount of a drawing is determined as intend to use the funds and afterward how they the sum of the export shortfall and the cereal im- did so. Usually, only exports to the EC are cov- port excess, subject to quota limits. Since January ered, although in certain cases coverage has been 1984, the quota limits on drawings under the cereal extended to exports to other ACP states or the decision have been 83 percent of quota for cereal world as a whole. import excesses and 83 percent of quota for export To qualify for compensation under the third shortfalls, subject to a joint limit of 105 percent of STABEX, in use since 1985, a commodity must quota for both components. generally account for 6.5 percent of the country's Since May 1981, there have been thirteen draw- export earnings and be 6.5 percent below the refer- ings under the cereal decision amounting to SDR ence level. (Both limits are set at 1.5 percent for 1.1 billion, of which SDR 0.5 billion was attribut- some countries.) The reference level is calculated able exclusively to excess cereal imports. The lim- as the arithmetic mean value of exports in the pre- ited use of the cereal decision largely reflects a ceding four years. Export shortfalls must not be global food supply situation from 1981 to 1985 due to national policy. characterized by record world cereal production The repayment provisions are generous. The levels, large stocks, declining cereal prices, and a least developed countries repay nothing. All loans substantial volume of food aid. All thirteen draw- are interest free. In the period 1975-82, STABEX ings under the cereal decision were caused by the made 205 transfers to 44 ACP countries, amount- effects of adverse weather on domestic food sup- ing to about $800 million. STABEX transfers ex- plies. ceeded aid flows from the European Development The CFF is not commodity-specific, and it fi- Fund (EDF) in several cases and represented a sig- nances shortfalls in agricultural exports only to the nificant portion (10-66 percent) of the aid flow extent that these contribute to the shortfalls in total from the EDF for just under half of the ACP coun- export earnings. However, since agricultural prod- tries. Payments have been unevenly spread over ucts are subject to greater instability than most commodities, countries, and time. Thus, under other products and constitute a significant share of STABEX I (1975-79) three beneficiariesMau- the total export earnings of developing countries, ritania, Senegal, and Sudanaccounted for 30 per- shortfalls in agricultural exports have contributed cent of payments, and four others for another 20 to a large number of drawings by the developing percent. Prominent among the commodities sup- countries. ported are cotton, sisal, coffee, cocoa, and ground- nuts. The EC Commission estimates that 69 per- STABEX cent of the transfers were due to weakening economic conditions and 31 percent to local cir- The EC's STABEX compensatory finance scheme cumstances, such as drought, disease, and flood. was established under the first Lomé Convention The EC rejects a significant number of claims as of 1975. It is restricted to the EC's African, Carib- ineligible-28 percent during 1975-79 and 32 per- bean, and Pacific (ACP) states and aims to stabilize cent during 1980-82. In 1980 and 1981, STABEX their export earnings. Exports of forty-eight agri- exhausted its funds and was able to honor only 53 cultural products are covered, mineral exports be- percent and 43 percent of eligible claims, respec- ing the subject of a separate scheme. A total of tively, although unused funds from subsequent 139 years allowed the coverage of these claims to be Table 7.3 summarizes the main features of the restored to 65 percent for both years. CFF and STABEX. While they differ in many prac- For the ACP countries the most attractive feature tical aspects, they are addressed to similar prob- of STABEX is its high grant elements. For the least lems. A full assessment of their value is difficult. developed countrieswhich repay nothingall Both have assisted a large number of countries. transfers are grants; for the remainder, the zero rate of interest and the possible waiver if exports stay depressed for a long period implied grant ele- Table 7.2 The principal beneficiaries of STABEX's grant elements, 1975-83 ments of about 60 percent during the period 1975- Absolute amounts 83. However, the grants were very unevenly dis- tributed, and there is no discernible relationship Receipts (millions of As a percentage between grant components and indicators of pov- Country 1983 dollars) of 1983 exports erty or the need for foreign assistance. The princi- Senegal 77 13.2 pal beneficiaries are listed in Table 7.2. Sudan 61 9.8 STABEX affects the allocation of economic re- Côte d'Ivoire 33 1.6 sources both within and between countries. For Mauritania 30 10.5 Tanzania 23 6.2 example, by supporting particular sectors STABEX seems likely to encourage excessive production of Per capita amounts covered commodities, especially those which have As a percentage the greatest market risks. Internationally, non- Receipts of 1983 estimated Country (1983 dollars) GNP per capita ACP countries producing STABEX commodities are put at a disadvantage because they do not re- Dominica 62 6.6' Kiribati 53 11.5 ceive protection from risk, and they may have to 5.8 Tonga 43 switch to producing goods in which their com- Western Samoa 40 7.1 parative advantage is less. Also, the restriction of Vanuatu 38 6.5 STABEX to exports to the EC market redirects and a. GDPpercapita. distorts international trade. Source: Koester and Herrmann (background paper). Box 7.3 The Lomé Convention The EC's arrangements with African, Caribbean, and however, this matters little to the ACP states, which Pacific states, which replaced former colonial prefer- are by and large tropical. Second, preferences are ex- ence schemes, were formalized under the first tended for tropical products that are supplied princi- Yaoundé Convention of 1963 and are now enshrined in pally by the ACP states and that pose little threat to the the Lomé Convention, the third of which was signed EC's domestic producers. Such goods are typically in 1984. The STABEX compensatory financing facility is granted unrestricted tariff-free access. However, since a principal feature of the Lomé Convention. Other fea- similar rights accrue to many other exporters through tures are the free access for most ACP goods into the the EC's other preferential arrangements or because EC and the European Development Fund, which ad- tariffs are zero anyway, the margins enjoyed by the ministers foreign aid to ACP countries. ACP countries over other developing countries are lim- The Lomé Convention covers most of the EC mem- ited. More than half of the ACP exports are covered by bers' former colonies, with the exception of the indus- other EC preference schemes. trial and Asian members of the British Common- Third, there is a small class of goods for which spe- wealth. They were denied membership in 1973 on the cial arrangements existrum, bananas, beef, rice, and grounds that they were either much bigger or much sugar. ACP rum quotas remain unfilled, and the ACP richer than the original associated states. There are countries have not been able to increase their shares of sixty-six developing-country members of Lomé at the export market for bananas. In contrast, the ar- present, the majority of which are among the smallest rangements for sugar grant the ACP countries both the and poorest nations. right and the duty to sell in the EC at a fixed price. In The preferences granted to ACP states in agricultural general, this price far exceeds the world price, and so trade fall into three groups. First, small preferences are the system transfers income to the ACP countries. In granted on commodities covered by the CAP. Since the cases of both sugar and beef, the system transfers such commodities are mostly temperate-zone crops, income to ACP countries. In some years the transfers 140 But by their very nature they do not fully compen- objectives, permit quick identification of shortfalls, sate for earnings shortfalls. The purpose of com- and provide prompt payments without compli- pensatory finance is to maintain spending in the cated conditions. Neither the CFF nor STABEX has face of a temporary fall in export receipts. To be been ideal in these respects. While, on average, successful, compensatory schemes must have clear the compensation rate has been around 60 percent, Table 7.3 Characteristics of the CFF and STABEX Item CFF STABEX Year of initiation 1963 1975 Eligibility Members of the IMF (137) Sixty-six ACP states Drawings 1977-82 Number of transactions 112 171 Amount $7.3 billion $0.8 billion Shortfall $11.9 billion $1.3 billion Compensation rate 62 percent 59 percent Coverage Total exports (may include services Forty-eight commodities and exclude cereal imports) Shortfall Net Gross (sum of individual shortfalls) Reference level Five-year moving average, centered on Four-year moving average, centered shortfall year two and a half years previous to shortfall year Limits Country-specific quotas Overall budget limit Interest rate IMF standard (7.8 percent currently) None Repayment schedule Three to five years after loan Two to seven years after loan Repayment obligation In full None for low-income economies, conditional for other countries Grant element Around 20 percent More than 80 percent have been huge. In 1979 up to 7 percent of Botswana's ACP states examines trade intensity indicesthe ratio I GNP came from beef transfers, and 22 percent of Mau- of an exporter's share of a particular market relative to ritius' GNP came from sugar transfers in 1975-76. But its share of the world market. Trade intensity has al- the arrangements for sugar cause economic inefficien- ways been high between "related" statesfor exam- cies because they encourage some ACP countries to ple, between Britain and the Commonwealth. It is cor- expand their output unduly. They also generate exces- respondingly low between less related parties. With sive transport costs because the EC, which produces the advent of the Lomé Convention, however, ACP more sugar than it consumes, also exports sugar. trade intensities with non-EC markets declined while The Lomé Convention also grants ACP countries those with EC markets rose. This was especially notice- I preferential access for manufactured and semimanu- able in the case of ACP states' trade with the United factured exports. However, since most manufactures States. face low general tariffs and are covered by the GSP, the While these facts suggest that the Lomé Convention preference is small. Only where the GSP limit on tariff- has altered the pattern of world trade, the change has free access is tight have the ACP countries been able to not been large. Moreover, it is difficult to say whether exploit their preferences. the Lomé Convention has increased trade or merely It has proved hard to measure the effects of the Lomé redirected it. The ACP countries may merely have Convention on world trade, not least because the his- taken market share in the EC away from other devel- torical trading links that bind former colonies to Eu- oping countries by diverting exports away from other rope are weakening. Since 1965 most ACP states have markets. To put the argument in an extreme form, it is diversified their exports away from Europe, although possible that all the Lomé Convention has achieved is their share in EC imports has not changed dramati- to change the direction of world trade, without increas- cally. But do ACP countries continue to depend dispro- ing it, while adding to transport costs. portionately upon the EC market? One study of the 141 there has been considerable variation from country to country that is not clearly attributable to either need or the ability to repay. Delays have occurred Box 7.4 The EC's Sugar Protocol that might have been avoidable. Still, both The Sugar Protocol of the Lomé Convention allows schemes have provided valuable assistance on eighteen developing countries to export fixed amounts some occasions. of sugar to EC members free from the usual import restrictions. In addition to the countries that are signa- Trade preferences tories to the Sugar Protocol, India benefits from similar provisions. The industrial countries have introduced several The benefits of these arrangements to the favored exporters depend on the sizes of their quotas, which schemes that give access to imports from develop- are unevenly distributed. In 1981-82, five countries ac- ing countries at reduced or zero tariffs. In theory, counted for 77 percent of the total quota, with Mauri- such preferences should increase the exports of de- tius alone receiving 38 percent. Four countries had veloping countries, largely at the expense of those quotas covering half or more of their domestic produc- countries excluded from the schemes. The idea is tion (80 percent for Mauritius), while four had quotas to improve the economic welfare of developing below 10 percent of domestic output (see Box table countries. The actual benefits, however, have been 7.4). One of the peculiarities of the Sugar Protocol is that limited, partly because the terms of the prefer- even net importers of sugar export to the EC. Kenya, ences are restrictive. The schemes exclude, or which produced less sugar than it consumed between place tight limits on, precisely those products in 1976 and 1978, still exported to the EC. The peculiari- which developing countries could be most compet- ties are compounded by the fact that the EC itself is a itive. Among the least favored goods are many ag- net exporter and thus reexports the sugar imported ricultural products. Overall, these arrangements under the protocol. Since transport, insurance, han- have had little impact on agricultural trade. dling, and waste account for up to 20 percent of the value of sugar trade, the losses involved are Trade preferences have a long history. Although considerableabout $42 million in 1981-82. the General Agreement on Tariffs and Trade By paying producers more than the world price for (GATT) embodies the principle of nondiscrimina- sugar, the Sugar Protocol transfers income from con- tion, from the start it accepted the continuation of sumers in the EC to producers in developing countries. special schemes such as the British Common- Since the world price of sugar fluctuates widely, the wealth Preferences. Later, the EC countries estab- transfer varies from year to year, but it is nearly always lished preferences for their former colonies, pref- positive. Negative transfers occur when the world price rises above the guaranteed price at which devel- erences which continue today in the Lomé oping countries are obliged to supply sugar. Convention linking the EC to sixty-six ACP states. The estimates for income transfers quoted in the ta- The principle of nondiscrimination further eroded ble are exaggerated to the extent that the Sugar Proto- in 1964, when the GATT allowed developing coun- col reduces the world price. If exporters behaved in a tries to receive preferential access to industrial profit-maximizing way, world prices would not be af- markets. This section considers the Generalized fected by the protocol. This is because the high guaran- System of Preferences (GSP), which is open to all teed price is received on only a fixed quantity of sugar, so there is no virtue in producing more sugar for the developing countries, as well as restricted schemes such as the EC's Lomé agreement with the ACP states and the Caribbean Basin Initiative (CBI) of the United States. The Generalized System of Preferences about 7 percent of developing countries' total ex- Under the GSP, developing countries' exports to ports. markets in industrial countries enjoy tariff reduc- Many agricultural goods are excluded. For exam- tions or exemptions. The scheme has had little ef- ple, the United States excludes sugar and dairy fect on exports, however, partly because its prod- products (both of which are subject to overall im- uct coverage is so limited. Imports from port quotas), peanuts, and long-staple cotton. It beneficiaries are only a fraction of the total imports does so because increased imports would make it of industrial countries. For many imports, regular harder to run a system of price support for domes- tariffs are zero. Overall, about 2 percent of OECD tic farmers. For the same reason, the EC and Japan imports qualify for preferences, equivalent to also exclude most agricultural products. 142 EC market than the quota allows. Also, an ACP coun- EC are passed on to producers in this manner. The try is free to choose the cheapest way of obtaining the additional supplies due to this policy lower the world sugar it supplies to the EC. If, in the absence of the price of sugar. protocol, it would have imported sugar because its Because quotas are determined largely by historical own production costs exceeded the world price, then levels of sugar exports, the protocol tends to freeze with the protocol it should just import sugar and reex- world trade patterns. This puts new producers or port it to the EC. countries which have improved their efficiency at a But this practice is rare. More frequently, the coun- disadvantage. tries covered by the protocol tend to pay domestic pro- Finally, as a part of the mechanism for fixing the EC's ducers a price somewhere between the EC price and internal sugar price, the protocol helps to isolate the the price in the world market. The marketing board in EC from the world market. It also tends to isolate ACP Mauritius, for example, pays producers more for pro- producers. This increases the burden of adjustment ducing sugar in excess of the EC quota than they could elsewhere and the instability of world market prices. get in the world market. Some of the transfers from the Box table 7.4 EC sugar quotas and transfers, 1981-82 Annual delivery Maximum transfer, 198 1-82' quotas in 1981.-82 Exports as a Quota as a As Percentage percentage percentage Total ECU percentage Quantity of total of quota, of production, ECU per of GDP Preferred countries (tons) quota 2981 1981 (million) capita or GNP Barbados 49,300 3.8 100 51 7.5 28.8 0.8 Belize 39,400 3.1 111 38 6.0 40.0 4.1 Fiji 163,600 12.7 116 34 21.8 33.0 2.3 Guyana 157,700 12.2 127 49 23.9 26.5 4.7 India 25,000 1.9 0 0 3.4 0.0 0.0 Jamaica 118,300 9.2 105 58 17.9 7.9 0.6 Kenya 93 0.0 0 0 1.4 0.1 0.0 Madagascar 10,000 0.8 0 9 1.5 1.6 0.5 Malawi 20,000 1.6 105 11 3.0 0.5 0.2 Mauritius 487,200 37.8 94 80 75.8 79.8 6.4 St. Christopher and Nevis 14,800 1.1 107 45 2.2 36.6 4.3 Suriname 2,667 0.2 . . 33 0.4 10.8 0.3 Swaziland 116,400 9.0 106 32 18.9 32.0 3.5 Tanzania 10,000 0.8 0 8 1.5 0.1 0.0 Trinidad and Tobago 69,000 5.4 98 74 10.5 8.7 0.2 Uganda 409b 0.0 . . . . . . . Zaire 4,957 0.4 0 31 0.8 0.5 0.0 Total 1,288,826 100.0 100 14 196.5 0.2 Allowing for transport, insurance, and handling costs. Quota abolished in 1981. The Lomé Convention sugar is significant. Eighteen ACP countries have quotas to export sugar to the EC. As Box 7.4 The Lomé Convention, described in Box 7.3, is the shows, these quotas insulate ACP producers and best known of the other preferential schemes. EC consumers from world prices and thereby de- While the effective preference margins under the stabilize the unrestricted world sugar market. convention are reduced by the preferences offered They discourage efficiency among producers, pre- under the GSP, the margins are quite significant vent EC consumers from buying cheaply, increase for some products, such as canned tuna, certain transport and handling costs, discriminate against tropical fruit products, and tobacco. Among agri- efficient sugar producers outside the arrangement, cultural products, the impact of the convention on and encourage higher world output of sugar. They 143 Box 7.5 Agricultural trade among developing countries In 1980, agricultural trade among developing countries markets; this means that the trading potential of other was worth $21 billion; it accounted for 25 percent of developing countries may not be fully exploited. developing countries' total agricultural exports. From Subsidized exports from industrial countries, of- 1970 to 1980, developing countries' agricultural exports ten combined with overvalued currencies in develop- to one another grew faster than their corresponding ing countries, tend to reduce developing countries' exports to industrial Countries, but the former still competitiveness. grew more slowly than the developing Countries' agri- Slow growth in the demand for imported food by cultural imports from industrial countries. industrial countries discourages developing countries About two-thirds of farm trade among developing from increasing production and reduces their access to countries takes place between regions. Asia trades the foreign exchange they need in order to import from with other developing regions the most, Africa and the other developing countries. Middle East the least. A few commoditiesmainly Several measures have been proposed to increase rice, sugar, raw cotton, and coffeedominate the trade agricultural trade among developing countries, includ- among developing countries. ing a global system of trade preferences and an inter- There may be good reasons why this trade remains national information system on trade financing. Trade relatively small. The expansion of trade among devel- preferenceseither general or regionalare not likely oping Countries should be pursued within the overall to be very effective. There are now eleven economic aims of economic development; it is not a goal in itself. integration or clearing arrangements among develop- But the low volume of farm trade among developing ing countries. Most offer tariff preferences among countries also reflects a variety of Constraints: members but little relaxation of nontariff barriers. Tariffs in developing countries tend to be biased These groups account for a significant fraction of total against the types of goods exported by other develop- agricultural trade among developing Countries but ing countries; nontariff barriers tend to restrict agricul- only rarely for more than 20 percent of their members' tural trade more than manufactured trade. Among the trade. Increased emphasis on market information and fifteen largest developing-country importers, quotas, intelligence holds out a better hope for assisting devel- conditional prohibitions, and licensing are applied to oping countries to expand their agricultural exports. 31 percent of agricultural imports but only 23.5 percent Such systems are not cheap to develop, and countries of manufactured imports. Although tariffs on rice are that export similar crops need similar information. So low, half of world rice imports are subject to direct it may be most economical for regions or groups of government control and a further 20 percent are regu- countries to cooperate in setting up market informa- lated by licenses. tion systems. This could be supported by technical co- Transport and communication between develop- operation, harmonization of standards, increased use ing countries are often inadequate. It is easier, cheaper, of long-term contracts, and joint ventures. and more profitable to seek out information on large do, however, transfer a large amount of income to ing the erosion of their preferences, they tend to those who hold quotas. oppose more widespread trade liberalization. Although the economic effects of the Lomé Con- vention are hard to quantify, there are several rea- The Caribbean Basin Initiative Sons for thinking that they are relatively small: first, preference margins are slim; second, the The CBI of the United States, signed in August main effect of most preferences seems to have 1983, gave twenty-seven Caribbean states duty- been to divert trade rather than to boost it; third, free access for most of their exports to the United market structures sometimes allow monopsonistic States. In return, the Caribbean states agreed to European importers to capture the tariff prefer- certain changes in taxation and economic policy. ences; and fourth, the ACP countries have not al- While all the parties enjoy several obvious benefits ways taken (or been able to take) full advantage of from the CBI, its trade provisions have had negligi- any increase in trade opportunities that has arisen. ble effects so far. Textiles, clothing, footwear, The last point applies particularly to the smallest canned tuna, and petroleum are among the items and least developed countries. In return for these excluded from preferences; sugar and beef are sub- generally small and uncertain benefits, the ACP ject to special treatment. Sugar quotas for CBI countries are bound into EC protectionism. Fear- countries have been reduced from about 1.5 mil- 144 lion tons in 1980 to 1.0 million tons in 1986. The schemes, they tend to divert at least as much as U.S. Food Security Act of 1985 requires them to be they create. And too great a concentration on re- reduced further if they conflict with the domestic gional markets tends to blind countries to the ad- sugar price support program. Beef quotas are also vantages of supplying the world market, which subject to U.S. domestic policy constraints. offers more scope for exploiting comparative ad- vantage and greater security from regional eco- Preference schemes among developing countries nomic shocks. Box 7.5 discusses agricultural trade among developing countries. Apart from schemes already described, there are several other preference arrangements that devel- Food aid oping countries use for trade among themselves; these normally involve regional groups. To the ex- During the 1960s and early 1970s, many govern- tent that these arrangements create extra trade, ments and observers were concerned about wide- they are beneficial; but like other preference spread shortages of food. The Food and Agricul- Box 7.6 Food aid institutions Large-scale international food aid started with the about 25 percent of all food aid shipments were han- passing of U.S. Public Law 480 in 1954. This legislated dled by the WFP, compared with 5 percent in the late for the disposal of grain surpluses abroad 1960s. to expand international trade among the United Food aid reached record levels-17 million tonsin States and friendly nations . . . to make maximum 1965-66. Almost immediately, concern arose that ade- efficient use of surplus agricultural commodities in quate flows might not be maintained because the furtherance of the foreign policy of the United United States appeared to be stepping up its policy of States, and to stimulate and facilitate the expansion restricting the area planted to grain. This concern was of foreign trade in agricultural commodities pro- manifest in the Food Aid Convention of 1967, which duced in the United States by providing a means was adopted as part of the International Wheat Agree- whereby surplus agricultural commodities in excess ment. Under the convention, member countries prom- of the usual marketings of such commodities may be ised to provide 4.5 million tons of cereal food aid a year. sold through private trade channels (68 Stat. 457). The so-called world food crisis of 1972-74 led to the The United States and other donors have also convening of a World Food Conference in 1974. The adopted the FAQ's Principles of Surplus Disposal to conference set up a variety of institutions to promote minimize the disincentive effect that food aid has on food production, including the International Fund for commercial markets. A consultative subcommittee was Agricultural Development (IFAD) and the World Food set up to monitor the distribution of food aid and en- Council. It also sought to increase food aid. In 1979 the sure that the so-called usual marketing requirements conference recommended a target of 10 million tons of were being met. These require recipient countries to cereal food aid a year and the establishment of an inter- maintain commercial imports at a specified level even national emergency reserve of 500,000 tons, to be re- though they are also receiving food aid. The rule is still plenished annually. The current Food Aid Convention, insisted upon and monitored by the subcommittee, al- signed in 1980, guarantees minimum supplies of 7.6 though its effectiveness is questionable. million tons a year from twenty-two donor countries. The impact of dumping surplus food gave rise to The world food crisis also provided an impetus for considerable concern, and the hope of correcting it was using food aid for development purposes as well as for one of the motives behind the creation of the World emergency relief. In 1977 the United States amended Food Program (WFP) in 1961. Established under the Public Law 480, allowing conversion of food loans to joint auspices of the United Nations and the FAQ, the grants under a new Title 'Food for Develop- WFP was the first multilateral food aid agency. It aims ment." Its aims are to help small farmers, sharecrop- to supply and coordinate food aid not only for relief pers, and landless laborers increase food production and emergency purposes, but also for development and to stimulate rural development in general. The EC projects. It is hampered, however, because its food do- also adopted new food aid guidelines in 1983 to inte- nations may not be sold in the recipient countries' mar- grate food aid better with the development strategies kets. Donated food can be used for projects only if it is of recipient countries and to reduce the adverse effects distributed through cumbersome channels such as di- of such aid on local production and consumption pat- rect feeding or food-for-work programs. By 1983-84, terns. 145 Table 7.4 Food aid in cereals, 1971-83 Percentage share Region 1971-72 1976-77 1982-83 Africa 8.3 28.4 50.4 Sub-Saharan Africa 2.5 10.4 26.9 Asia 52.7 59.7 32.3 Bangladesh 3.4 17.3 13.6 India 10.1 16.2 3.1 Indonesia 6.1 2.0 1.7 Latin America 3.9 7.7 13.7 Colombia 0.9 3.8 0.0 Honduras 0.0 0.2 1.0 Memo items Low-income countries 43.1 79.0 84.2 Least developed countries 1.3 26.7 32.3 World total (thousands of tons) 17,513 6,847 9,198 Source: FAO and World Bank data. ture Organization (FAO) had long maintained that a low-income and food-deficit country-receives food supplies were chronically inadequate to meet only 6 percent per person of what Egypt does. the basic needs of many of the world's people and Over the past decade, donor governments have were also prone to periodic crises. As a result, vari- tried to send more food aid to areas where dietary ous international and bilateral arrangements were deficits are largest, . and they have made some made to cope with both chronic and temporary progress in this direction (see the bottom part of food shortages (see Box 7.6). Table 7.4). Food aid is now generally directed to- Although famine relief is the most visible form of ward poorer countries, but some countries that are food aid, it is much less common than project food not poor receive significant aid. aid (assistance to particular development projects The quantity of food aid is more closely related given or lent in the form of food) and program to the needs of donors than to those of recipients. food aid (food donated as balance of payments or For example, U.S. legislation on food aid-Public budgetary support). In all its forms, food aid ac- Law 480-makes explicit mention of foreign policy counts for a relatively small share of foreign assis- considerations, surplus disposal, and the avoid- tance to developing countries. With commodities ance of conflict between commercial and conces- valued at world prices, food aid in recent years has sional exports. Donors have found food aid a con- amounted to about $2.6 billion annually, about 10 venient way of disposing of surplus stocks, percent of official development assistance. In particularly of milk products. The level of food 1984-85, twenty-five donor countries provided prices also affects the amount of food aid. In 1973- more than 100 developing countries with about 12 74, when food was in short supply and prices were million tons of cereals, 430,000 tons of vegetable high, wheat shipments were less than 4 million oil, 356,000 tons of skimmed milk powder, 98,000 tons, compared with around 10 million tons a year tons of other dairy products, and 21,000 tons of in the late 1960s. meat and fish products. Of this, only about 660,000 International food aid is only part of the answer tons, less than 5 percent of food assistance, was for to famine. To begin with, it does not solve the mas- emergency food aid. The United States is the larg- sive problems of internal food distribution. India's est donor (about 50 percent of food aid), followed recent success in avoiding famine-related deaths by the EC (about 30 percent). Australia, Canada, has owed much to its ability to shift grains from and Japan contribute about 14 percent collectively. regions with surplus food to those with deficits The distribution, quantity, and nature of food and to provide aid to the needy, either as food or in aid sometimes bear little relation to dietary defi- the form of an income supplement. By contrast, ciency. For example, 20 percent of all cereal aid the recent relief operations in Ethiopia and Sudan goes to Egypt, a middle-income country where the have been dogged by transport and communica- average calorie intake is about 28 percent more tions failures and other problems, which have hin- than needed for a healthy diet. By contrast, Togo- dered the flow of food to many of the worst af- 146 fected areas. These and other problems of Bangladesh received cereal food aid worth about emergency food aid are discussed in Box 7.7. $160 million at world prices. This was distributed Food aid is also provided to supplement domes- through the general food subsidy scheme, which tic production in normal times. As a result, domes- like such schemes in many other countries tic prices may fall, discouraging local production benefits both the poor and the relatively affluent and reducing farm profits. To minimize this effect, groups. food aid can be directed to the very poor, who are Two ways exist by which food aid can in princi- less likely to use it as an alternative to local sup- ple be prevented from deterring local production. plies. But, in practice, food aid has not been so First, countries could resell food on the world mar- directed in many cases. In 1982-83, for example, ket and buy back only as much as is genuinely Box 7.7 The challenges of emergency food aid The distribution of free food would appear to be a ered was actually distributed. straightforward solution to the immediate problem of The problem of transport is especially serious for starvation. But emergency food aid will be effective landlocked Countries. Imports into Burkina Faso, only if certain conditions are met. Chad, Mali, Niger, Zambia, and Zimbabwe must be The first requirement is information. Famines do not handled in the ports of neighboring countries. Reports happen suddenly. Farmers in Africa, accustomed to of delays are numerous. Take the case of Mali, which erratic rainfall, have evolved traditional means of cop- can import food through Senegal, Côte d'lvoire, or ing with food shortages, especially in the first year of Togo. Transportation through Senegal is by rail, and drought. But in the second year, widespread shortages capacity is limited. It is often difficult to obtain trucks may become unmanageable, and international aid may for the trip through Côte d'Ivoire because Mali may become necessary. Given the long period between the not have a cargo to send back and because trucks are first signs that the harvest may fail and the point at not always available, especially during the busy season which a large number of people starve, the provision from November to June when they are used to trans- of information would not seem too difficult. In many port Côte d'Ivoire's export crops to the ports. The instances, however, the governments of affected coun- route from Togo passes through Niger, where, because tries have been reluctant to release details of impend- of unpaved roads, the going is very slow, especially ing famine and have hindered international agencies during the rainy season. Food could be transported (both official and private) that wanted to publicize the through Nigeria, but Nigeria's ports are frequently emergency. Logistical difficulties (for example, in Ethi- congested. opia in 1973-74 and 1983-84 and in Mozambique in Food can also be held up on the seas or at the dock- 1983-84) and sometimes merely lack of attention (as in side. Estimates of the damage caused by delays in Mali and Chad in 1983-84) have made the collection of shipping and off-loading in Somalia in 1985 vary from information difficult. 10 to 30 percent of total food aid flows. If aid is de- The second requirement is the prompt reaction of layed, it can actually hinder the recovery from famine. donor countries. In the Sahelian drought of the late When food that had been promised in late 1984 arrived 1960s and early 1970s, large-scale relief efforts did not six months later in Sudan and Ethiopia, the rainy sea- start until 1973, five years after the drought and famine son had begun. Many of the roads were impassable, had begun. The FAQ announced late in 1982 that Ethi- and so the food could not be distributed. But when the opia would need large quantities of food aid the fol- rain ended and the harvest was gathered, the food aid lowing year. However, large-scale relief efforts did not became not only less urgent but also potentially coun- start until late 1984. One possible solution to such po- terproductive, because it forced prices below even the litical difficulties is to grant multilateral agencies, espe- seasonal low point. Kenya did not have enough stor- cially the World Food Program, a more prominent role age capacity for its own record food crop of 1985, but in emergency relief. Currently they handle only be- food aid was still arriving in response to 1984's tween 10 and 20 percent of total emergency aid. drought. As a result, the Kenyan Marketing Board (the It would be a mistake, however, to assume that a monopoly maize buyer) may have to refuse to buy simple shipment of food would cure starvation. In some maize, delay payments to farmers, and even ex- many cases aid throws substantial burdens onto fragile port maize at a loss. storage and distribution systems. In Sudan only 64 Early-warning systems, quicker donor response, and percent of the food aid pledged was distributed in improved distribution systems are all needed to make 1984-85, although 91 percent was delivered to the emergency food aid more effective. ports. In Ethiopia only three-quarters of the food deliv- 147 needed in extra demand. Second, they could re- food-for-work projectsby which food aid pays in duce commercial imports by the amount of the kind for infrastructural developmentare at times food aid. Donors of aid typically set terms which inefficient and poorly designed, and thus further prohibit both means, with the intent of ensuring reduce the real benefits of food aid. To promote net that food aid does not reduce the commercial de- additions to demand for their surplus products, mand for their food. If this prohibition is effective, aid-granting exporters sometimes supply com- food supplies in the recipient country will rise pro- modities that are not part of the recipients' normal portionately more than incomes, making the disin- diets. The resulting distortions of consumption centive effects particularly hard to avoid. How- patterns tend to increase the dependency of aid ever, these provisions are so little enforced that the recipients on continued food aid. While such prob- disincentive effects may be slight in practice. lems do not undermine the case for food aid, they Since food aid cannot legally be converted into do show how the limits on its use can sharply re- cash, much of it has to be distributed in kind. This duce its worth. There is growing awareness among saddles recipient governments with extra costs of donors about these limitations, as mentioned in administration, and often of transport as well. The Box 7.6. 148 National and international priorities in agriculture The past several decades of development have ties for developing countries with respect to pric- demonstrated that growth in agricultural produc- ing and trade policies. The recommended changes tion and productivity in developing countries can will benefit developing countries individually and match or surpass the growth in industrial coun- collectively. But these gainsas well as the gains tries, As discussed in Chapter 1, the record has for industrial countrieswill be much larger if sig- shown that agriculture can be a dynamic sector in nificant progress is made in liberalizing trade. The developing countries and contribute greatly to liberalization option is reviewed in the final sec- growth in real incomes, employment, and foreign tion. exchange earnings and to the alleviation of pov- erty. Although there is still substantial room for Priorities in developing countries improvement, the policies and investments in- creasingly being pursued by governments in many Many developing countries have begun to reform developing countries have given rise to guarded their agricultural and trade policies. In some cases, optimism about the long-term prospects of food particular programs, crops, or public institutions production increasing faster than population. This have been affected. In others, sweeping changes optimism replaces the Malthusian pessimism that have been made in conjunction with broader re- resurfaced in the wake of the unusual increases in forms of the whole economy. No generalizations food prices in the early 1970s. Given the sharp are possible about the specifics of desirable re- drop in commodity prices since then, there is now forms since their nature, design, and timing are little basis for believing that a fundamental break largely determined by country circumstances. At has occurred in the long-term trend of declining best, it is possible to indicate those areas that merit real food prices. careful consideration as candidates for reform. Episodes of commodity booms and slumps are Reforms of specific sectoral policies in agricul- nothing new; nor are dearths and famines, which ture should not be divorced from reforms of continue to occur periodically, albeit with much economy-wide policies and development strate- less frequency than in earlier times. Such episodes gies that induce strong biases against agricultural should not detract from the progress already production and exports. As was discussed in made, nor should they prevent recognition of the Chapter 4, many developing countries have dis- fact that agricultural programs and policies in dif- criminated against agriculture through high indus- ferent parts of the world affect one another. The trial protection and through inappropriate macro- pricing and trade policies that industrial and devel- economic and exchange rate policies. The taxation oping countries follow will have a great effect on of domestic producers that results implicitly from the pace of future growth in rural incomes and the overvaluations of the exchange rate can easily alleviation of poverty and hunger. At stake is the dominate the effects of sector-specific taxes and well-being of the hundreds of millions of very poor subsidies. The linkage between sectoral and mac- people in the world who depend on agriculture for roeconomic policies is usually so strong that it is their livelihood. best to carry out agricultural reforms in conjunc- This chapter begins with a review of the priori- tion with reforms of general economic policies. 149 The most important priority in agriculture is to Reforms of pricing and trade policies that affect ensure that the profitability of farming is not artifi- farmers cannot be separated from institutional is- cially depressed because of either macroeconomic sues since, in practice, many of the problems arise or sectoral policies. Yet, as seen in Chapter 4, both from the widespread use of public sector market- types of policies often create a strong bias against ing agencies, which charge excessive margins, im- agriculture. plement their policies inefficiently, and often re- Export taxes and quotaswhether they are used quire large subsidies from the government. The to exploit monopoly powers in trade, to subsidize objective of price stabilization that many agencies agroprocessing, to raise revenue, or to promote pursue typically leads to high costs, erratic poli- domestic production of competing cropsare com- cies, and the displacement of private operations in monplace and often excessive. They can greatly stabilization and risk management. This, again, is reduce the benefits that developing countries can an area that requires a great deal of emphasis in attain through trade. In the case of imports, one policy reforms. would expect the goal of self-sufficiency to lead Maintaining low food prices for urban con- countries to support domestic producers. But state sumers is an important motivation for having pric- trading in domestic and foreign markets and the ing policies that discriminate against farmers. The high costs of financing urban food subsidies can benefits of urban food subsidy programs are gen- lead to domestic procurement prices that are lower erally distributed widely across income classes; than import pricesan indirect subsidy to imports they are usually inefficient instruments for helping that has been very high in some cases. the poorest people. Since they are often very costly Some taxation of agriculture is, of course, un- and since the costs can suddenly increase because avoidable, if only because of the need for revenue. of world price movements, they almost always But there are many different forms of taxation. Tax- lead to suppression of producer prices, which re- ation of export and import-competing crops is per- duces incomes in rural areas where most of the haps the worst of the available options in develop- extreme poverty is often to be found. ing countries. The costs of such taxationin terms Small and well-targeted food distribution pro- of real national income forgonehave been ex- grams are more effective in promoting specific nu- tremely high. Greater reliance is desirable on land tritional objectives in especially disadvantaged and income taxes or on sales and value added grbups. To mitigate the effects of higher food taxes that bear on consumption. prices in general, it is clear that governments Apart from moderating the taxation of farm out- should pursue other policies that aim at increasing puts, it is also important to examine the principal incomes and employment; only if incomes rise can public spending programs that affect farm profit- chronic malnutrition be eliminated. ability. Many governments have introduced subsi- Governments provide many essential services dies on modern inputs and credit because they are and facilities that private markets cannot, such as thought to provide compensation for the taxation irrigation, research, extension, rural roads, and ed- of farm outputs. But, as Chapter 5 made clear, the ucation. These types of activities should account benefits of such subsidies are typically confined to for the bulk of public spending on agriculture. At small and relatively wealthy sections of the rural the same time, it must be emphasized that the ra- population. Excess demand at subsidized prices tionalization of pricing and marketing policies leads to rationing, and the actual costs of inputs to along the lines described above is required if the farmers often exceed officially sanctioned prices. full benefits of public spending are to be realized. The main concern of farmers throughout the de- Balanced agricultural strategies in developing veloping world is not so much the prices of these countries require not only public spending on es- inputs but their easy and timely availability. Input sential agricultural services, but also a sound pol- subsidies, as well as inefficiencies in public distri- icy environment within which private markets can bution agencies, tend to restrict availability. More- efficiently function. Providing both is the basic over, input subsidies encourage the wrong mix of challenge that governments in developing coun- inputs and misdirect technological change. Credit tries face. Many of them have taken measures to and machinery subsidies, for example, lower the improve the policy environment; others need to demand for rural labor. Public spending can be sig- review their macroeconomic and sectoral policies nificantly reduced by eliminating or curtailing in- to avoid intersectoral biases and expensive con- put subsidy programsand the savings can be sumer and producer subsidy programs that serve used to lower the taxation of farm outputs. neither growth nor other objectives. They should 150 also examine their taxation systems in order to in Chapter 7are often costly and inefficient inter- lower the economic cost of raising revenues. It is national responses to the problems caused by the critically important for governments to reduce variability of world prices. They frequently degen- their role in marketing agricultural outputs and in- erate into efforts by producer groups to raise, puts and to eliminate monopoly privileges for mar- rather than stabilize, prices. Compensatory ar- keting parastatals. This will allow a much greater rangements such as the IMF's Compensatory Fi- role for the private sector and improve the effi- nancing Facility are superior instruments for pro- ciency of domestic and international marketing. moting stability in earnings or outlays. Chapter 7 also showed that protection in agriculture has not Trade liberalization been mitigated by the Generalized System of Pref- erences or by regional schemes such as the EC's This Report has argued that the barriers to trade Lomé Convention and the U.S. Caribbean Basin that complement domestic programsespecially initiative. Examination of the expansion of tr.aL3P in industrial countriesconstitute a fundamental that has resulted from such schemes indicates that policy problem for the international community. the effects have been very limited, especially for This is not only because trade liberalization will the poorest countries. The preference schemes ap- help developing countries attain faster rates of eco- pear also to erode the interest of their beneficiaries nomic growth, but also because the benefits to the in promoting general trade liberalization. A reduc- industrial countries will be high as well. tion in protection generally reduces the special No firm estimates are possible of the total gains benefits from preferences. in world income that would occur if trade in agri- While full liberalization is unlikely, there is justi- cultural and agro-industrial products were liberal- fication for moving forward now with partial and ized. The estimates cited in Chapter 6 refer to se- gradual liberalization. One approach to partial lib- lected sets of commodities only. They do not take eralization for agricultural products would be for into consideration the long-term gains for both in- each country to review how it could reduce protec- dustrial and developing countries that could be tion of the most heavily protected products. A achieved by allocating investment funds and re- large part of the net losses caused by agricultural search activity in directions consistent with each protection, as well as a large share of taxpayer and country's comparative advantage; nor do they re- consumer costs, is concentrated upon a small flect the gains in manufacturing and agricultural number of products with substantially higher than trade that would result from faster growth of average rates of protection. In the United States world income if trade were liberalized. The esti- the farm products whose prices deviate most strik- mates are nonetheless significant because they ingly from what they ought to be are sugar, cotton, suggest that the potential gains can be very large rice, wheat, and peanuts; in the EC the products indeed and would, in the first instance, accrue are milk, beef, sugar, and cereals. Particular efforts mostly to countries with the highest levels of pro- should be made to lower the rates of protection for tection. While some developing countries may lose these products, and alternative means of provid- as a result of higher import bills for some commod- ing income support to farmers should be used to ities, the losses are likely to be more than offset by ease the transition to lower levels of protection. gains in exports of other commoditiesespecially As is the case in developing countries, many if they and the industrial countries reform their governments in industrial countries are consider- domestic policies simultaneously. ing policy reforms. This is particularly so in Can- Even though the estimates of the potential gains ada, the EC, Japan, and the United States, where from free trade presented in Chapter 6 are conser- farm programs currently involve very large costs vative, the gains to industrial countries would be for their citizens, both as consumers and as taxpay- nearly double their official development assis- ers. The United States has cut its milk support tance. The adage "Trade is better than aid" is prices, and Japan has been gradually reducing its clearly of great relevance to agriculture. rice price support relative to its avowed objective, Less government intervention, especially by in- namely that of covering the full cost of production. dustrial countries, will also help to stabilize inter- Still, the U.S. Food Security Act of 1985, which national prices and will assist both industrial and keeps most producer price guarantees roughly at developing countries in attaining their common current levels through 1990, suggests that the nec- objective of stability in farm incomes and prices. essary reforms have barely begun. International commodity agreementsdiscussed Without policy changes that reduce protection, 151 domestic costs will continue to rise in the years cept these results as an important component of ahead, whatever means are chosen for handling the information base from which negotiations growing excess supplies. There are three main could start. problems: The forthcoming negotiations have to deal with Adding to stocks, as the EC and the United extremely complex assessments of the effects of States have done for cereals and dairy products, modifying domestic farm programs. Previous will become increasingly costly and eventually un- methods of estimating the reciprocal increases in sustainable as stocks grow larger in relation to an- exports and imports resulting from reductions in nual domestic use or exhaust the available storage tariffs are quite inadequate to reflect the combined capacity. effects of modifications of domestic policies upon Restricting output through direct interven- both imports into and exports from a given coun- tions, such as the milk quotas in the EC or acreage try. With the increased use of deficiency pay- restriction programs in the United States, is unat- ments, direct export subsidies, and variable levies tractive, economically and politically. Compulsory and other nontariff barriers, what becomes impor- measures are unpopular with producers. If the tant is the effect of a change in programs on the net measures are voluntary, U.S. experience indicates balance of trade. This can be difficult to gauge in that the budgetary and economic costs of obtaining light of the complexity and variety of interventions even a modest reduction in output are great. present. The participants in the GATT negotiations Encouraging consumption domestically or on agricultural products must be willing to negoti- abroad via subsidies will require even more bud- ate about the various features of their domestic getary outlays. programs. This does not mean that any particular The main justification for agricultural protection set of price and income support programssuch as is to improve the incomes of farm families, espe- the variable levies and export subsidies of the EC cially those under financial stress. But the benefits or the target prices and deficiency payment pro- of protection go primarily to better-off farmers, grams of the United Stateshave to be aban- while the burden of higher food prices is borne doned. What governments must be willing to ne- disproportionately by poorer consumers. More- gotiate about are the degrees of protection over, most of the benefits of the programs become provided by their price and income support pro- capitalized into the price of the land at the time the grams and the effects that the programs have upon programs are inaugurated. Farmers who buy land production, consumption, exports and imports, once the programs are in effect benefit little, if at and international market prices. In other words, all, from their continuation but, unfortunately, there must be a willingness to negotiate about the face substantial losses when agricultural protection effects particular domestic measures have upon is reduced or abandoned. the markets available to others. The GATT negotiations The role of the World Bank Preparations are under way for negotiations on ag- The development of food and agriculture has been ricultural protection in a new round of GATT nego- an important objective of the World Bank since its tiations. There seems to be increasing recognition inception. In the past decade, roughly 25 to 30 per- in Western Europe and North America that a con- cent of the Bank's lending has been for agricultural tinuation of recent trends in the growth of produc- and rural development. Irrigation, drainage, and tive capacity and the very slow growth of domestic water control projects have been the major focus, and international demand will inevitably lead to followed by area and rural development and credit higher and higher costs of protection. Most OECD (see Table 8.1). Because the Bank finances only a members will soon find it necessary to modify part of total project costs, the $33 billion lent by the their domestic farm programs to reduce the costs Bank for agriculture since 1975 has helped finance that are incurred. total investments of about $87 billion. The analytical studies reviewed in this Report The Bank's experience with agricultural lending provide solid evidence about the costs of existing has demonstrated that economic rates of return in policies and the benefits that would be realized if the agricultural sector are comparable with those the market interventions were reduced. The fact in other sectors. Agricultural credit, irrigation, re- that the various studies come to similar conclu- search and extension, rural development, and sions should make it easier for governments to ac- many other projects have proved to be successful 152 Table 8.1 World Bank lending for agricultural and rural development, by purpose and period 19 75-79 1980-85 Amount Amount (billions (billions Major purpose of dollars) Percent of dollars) Percent Agricultural credit 1.64 14.2 3.71 17.5 Agricultural sector loan 0.17 1.4 1.32 6.2 Area development 2.92 25.2 4.34 20.4 Irrigation 3.72 32.1 6.49 30.6 Research and extension 0.59 5.1 0.92 4.3 Other (forestry) 2.54 21.9 4.44 20.9 Total agriculture 11.58 100.0 21.22 100.0 Total lending 38.02 81.17 means of raising agricultural productivity and the Many of these SALs address agricultural issues incomes of the rural poor. However, there also through changes in macroeconomic policies and have been failures. Agricultural projects are vul- through agricultural trade, pricing, and institu- nerable to many factors, one of the most important tional adjustments. In some countries, however, being the policy environment. the Bank's support of government reforms has Traditionally, Bank-supported projects, besides been sector-specific. Since 1979 there have been financing investments, have addressed a range of seventeen agricultural sector adjustment loans. policy issues that are specific to the performance of The majority (thirteen) were approved after 1983. the project and the sector. These have included The size of the loans has ranged from $5 million for cost recovery, interest rates, reforms of institu- Malawi to $303 million for Brazil. Most of these tions, and counterpart funding. It has become in- sector adjustment loans have focused on prices creasingly apparent, however, that broad issues of paid and received by farmers, controls on financial reform involving pricing and trade policies to facil- markets, performance of parastatals, trade barri- itate structural change cannot be addressed or fi- ers, and the size and composition of public expen- nanced through project lending. ditures. In some instances-for example, in Ecua- Since 1980 the Bank has been involved in devel- dor, Turkey, and Yugoslavia-the agricultural oping and supporting programs of structural and sector adjustment loans have been coordinated sectoral adjustment. With structural adjustment with SALs or with adjustment loans in other sec- loans (SALs), funds are disbursed in support of a tors. Coordination is also maintained with other program of broad policy reforms rather than for a agricultural lending, since the success of such specific investment. Agreement is reached be- lending often depends on the existence of an ap- tween the borrowing government and the Bank on propriate policy framework. specific measures of reform, and progress is moni- SALs and sector adjustment lending have tored to form the basis for the release of funds. proved to be important instruments for supporting Generally, SALs have supported changes in pric- reform programs of an economy-wide and sectoral ing, trade, and public sector policies, as well as nature. Improving agricultural policies can be a changes in the extent of government controls on prolonged process; typically, a sequence of loans is various productive activities. Because economic re- required, and in some cases both SALs and sector structuring normally takes several years, SALs are adjustment loans are involved. In countries where designed to span five or more years and may in- the adjustment process is well established, Bank volve up to five separate loans. Since 1980 the assistance generally takes the form of sector ad- Bank has approved thirty-two SALs in eighteen justment loans that support in-depth restructuring countries, for a total of more than $4.6 billion. of policies and programs. 153 Statistical appendix The tables in this statistical appendix present data data on population, national accounts, trade, and for a sample panel of developing countries, along external debt. Readers should refer to the technical with information available for industrial countries notes to the World Development Indicators for def- and high-income oil exporters. The tables show initions and concepts used in these tables. Table A.1 Population growth, 1965-85 and projected to 2000 1985 Average annual growth (percent) population Country group (millions) 1965-73 1973 -80 1980-85 1985-90 1990-2000 Developing countries 3,451 2.5 2.1 2.0 2.0 1.8 Low-income countries 2,305 2.6 2.0 1.9 1.8 1.7 Asia 2,071 2.5 1.9 1.8 1.7 1.5 India 765 2.3 2.3 2.2 2.0 1.7 China 1,041 2.7 1.5 1.2 1.3 1.2 Africa 234 2.8 2.9 3.0 3.2 3.1 Middle-income countries 1,146 2.5 2.4 2.3 2.3 2.0 Oil exporters 502 2.5 2.6 2.6 2.6 2.3 Oil importers 643 2.4 2.2 2.1 2.0 1.8 Major exporters of manufactures 420 2.4 2.1 1.9 1.8 1.6 High-income oil exporters 20 4.6 5.4 4.3 3.9 3.3 Industrial market economies 737 0.9 0.7 0.6 0.5 0.4 World, excluding nonmarket industrial economies 4,209 2.2 1.9 1.8 1.7 1.6 Nonmarket industrial economies 393 0.8 0.8 0.8 0.7 0.6 Table A.2 Population and GNP per capita, 1980, and growth rates, 1965-85 1980 1980 GNP 1980 GNP Average annual growth of GNP per capita (percent) (billions population per ca pita Country group of dollars) (millions) (dollars) 1965-73 1973 -80 1981 1982 1983 1984a 1985b Developing countries 2,064 3,124 660 4.1 3.2 1.0 -0.7 0.0 3.3 2.4 Low-income countries 550 2,102 260 3.0 2.7 3.0 3.2 6.1 7.4 6.1 Asia 497 1,900 260 3.3 3.0 3.5 3.7 6.9 8.3 6.6 China 287 978 290 5.0 3.8 3.5 6.1 8.8 12.8 9.6 India 162 687 240 1.6 1.8 3.5 0.5 5.1 2.2 1.9 Africa 53 202 260 -1.3 -2.4 -2.7 -2.8 1.2 0.1 -0.4 Middle-income oil importers 963 580 1,660 4.6 3.1 -0.8 -2.0 -1.6 1.8 1.0 East Asia and Pacific 212 162 1,310 5.7 5.7 3.9 1.8 4.7 4.7 1.0 Middle East and North Africa 25 31 820 3.5 4.2 -1.9 4.4 0.3 -0.9 1.6 Sub-Saharan Africa' 26 33 780 2.0 0.5 3.8 -5.0 -5.5 -4.5 -0.6 Southern Europe 213 91 2,340 5.4 2.9 0.2 0.0 -0.9 0.9 1.1 Latin America and Caribbean 411 234 1,760 4.5 2.9 -4.2 -4.9 -4.5 1.2 2.1 Middle-income oil exporters 551 441 1,250 4.6 3.4 1.5 -2.8 -4.4 0.7 0.0 High-income oil exporters 226 17 13,290 4.1 5.9 0.7 -7.6 -15.7 -3.0 -8.5 Industrial market economies 7,540 716 10,530 3.7 2.1 1.1 -1.3 1.6 3.9 2.4 a. Estimated. b. Projected on the basis of GDP. c. Excludes South Africa. 154 Table A.3 GDP, 1980, and growth rates, 1965-85 1980 GDI' Average annual growth of GDP (percent) (billions Country group of dollars) 1965-73 1973 -80 1981 1982 1983 1984a 1985t Developing countries 2,094 6.6 5.4 3.5 2.0 2.0 5.4 4.3 Low-income countries 549 5.6 4.7 5.0 5.3 7.8 9.4 7.8 Asia 495 5.9 5.0 5.4 5.7 8.6 10.2 8.3 China 287 7.8 5.8 4.9 7.7 9.6 14.0 10.6 India 162 4.0 4.1 5.8 2.8 7.7 4.5 4.0 Africa 53 3.9 2.7 1.6 0.8 0.3 0.7 2.1 Middle-income oil importers 979 7.0 5.5 2.1 0.8 0.8 4.1 3.0 East Asia and Pacific 214 8.6 8.1 6.5 3.9 6.4 6.4 2.7 MiddleEastandNorthAfrica 24 5.6 7.1 1.0 7.8 2.9 1.9 4.1 Sub-Saharan Africa' 27 5.1 3.6 6.9 -1.0 -1.4 -1.1 2.9 Southern Europe 212 7.0 4.8 2.0 2.1 0.9 2.7 2.5 Latin America and Caribbean 422 7.1 5.4 -1.0 -1.5 -1.7 3.7 4.1 Middle-incomeoilexporters 566 7.1 5.8 4.4 1.0 -1.9 3.1 2.5 High-income oil exporters 225 9.2 7.7 1.6 -1.7 -7.1 1.3 -5.0 Industrial market economies 7,440 4.7 2.8 1.9 -0.6 2.3 4.6 2.8 a. Estimated. b. Projected. c. Excludes South Africa. Table A.4 Population and composition of GDP, selected years, 1965-85 (billions of dollars, unless otherwise specified) Country group and indicator 1965 1973 1980 1981 1982 1983 1984 1985" Developing countries GDP 327 740 2,094 2,216 2,141 2,048 2,089 2,219 Domestic absorption' 331 747 2,141 2,288 2,198 2,066 2,083 2,223 Netexports'1 -4 -7 -47 -72 -57 -18 5 -4 Population (millions) 2,207 2,691 3,124 3,187 3,255 3,319 3,386 3,451 Low-income countries GDP 141 252 549 541 539 571 571 627 Domestic absorption' 143 253 569 557 551 584 584 654 Net exports'1 -2 -1 -20 -16 -12 -13 -13 -27 Population (millions) 1,493 1,827 2,102 2,141 2,185 2,225 2,265 2,305 Middle-income oil importers GDP 128 333 978 1,034 1,027 942 946 993 Domestic absorption' 130 340 1,018 1,079 1,059 953 948 986 Net exports'1 -2 -7 -40 -45 -32 -11 -2 8 Population (millions) 412 497 580 593 605 618 631 643 Middle-income oil exporters GDP 58 155 566 641 576 535 571 598 Domestic absorption' 58 153 553 652 587 528 551 583 Net exports'1 0 2 13 -11 -11 7 20 15 Population (millions) 301 369 441 453 465 477 489 502 High-income oil exporters GDP 7 28 225 264 257 222 211 Domestic absorption' 5 16 144 171 191 Net exportsd 2 12 81 93 66 . . . . Population (millions) 8 11 17 17 18 19 20 20 Industrial market economies GDP 1,369 3,240 7,502 7,600 7,505 7,760 8,099 8,475 Domestic absorption' 1,364 3,231 7,562 7,612 7,504 7,757 8,124 8,505 Net exports'1 6 9 -60 -12 1 3 -25 -30 Population (millions) 632 681 716 721 725 730 734 737 a. Estimated. b. Projected. c. Private consumption plus government consumption plus gross domestic investment. d. Includes goods and nonfactor services. 155 Table A.5 GDP structure of production, selected years, 1965-84 (percent of GDP) 1965 1973 1980 1981 1982 1983 1984 Agri- Agri- Agri- Agri- Agri- Agri- Agri- cul- Indus- cul- Indus- cul- Indus- cul- Indus- cul- Indus- cul- Indus- cul- Indus- Count ry group ture fry ture try ture try ture try ture try ture try ture try Developing countries 31 29 26 33 20 38 19 37 19 36 20 36 21 37 Low-income countries 44 27 40 33 36 36 36 34 36 34 37 34 36 35 Asia 42 28 39 34 35 38 35 36 36 35 36 35 36 36 India 47 22 50 20 37 25 35 26 33 26 36 26 35 27 China 39 38 33 44 33 48 35 46 37 45 36 45 36 44 Africa 47 15 42 19 41 18 41 17 43 17 43 15 38 16 Middle-income countries 22 31 17 35 14 39 14 38 14 37 14 37 14 39 Oil exporters 22 26 18 33 14 42 13 40 14 40 15 40 15 39 Oil importers 21 33 17 35 14 37 14 36 13 36 13 36 14 37 Major exporters of manufactures 20 35 15 37 12 39 12 38 12 38 12 38 12 38 High-income oil exporters 5 65 2 72 1 77 1 76 1 74 2 64 2 62 Industrial market economies 5 40 5 39 4 38 3 37 3 36 3 35 3 37 World, excluding nonmarket industrial economies 10 38 9 38 7 39 7 38 7 37 7 36 10 38 Table A.6 Sector growth rates, 1965-84 Agriculture Industry Service Country gmup 1965-73 1973-80 1980-84 1965-73 1973-80 1980-84 1965-73 1973-80 1980-84 Developing countries 3.2 2.7 3.9 8.5 6.0 2.2 7.4 6.4 2.9 Low-income countries 3.0 2.5 6.2 8.7 7.3 7.7 6.8 4.8 6.4 Asia 3.1 2.6 6.5 8.8 7.6 8.0 7.3 4.9 7.7 India 3.7 2.0 2.8 3.7 5.0 4.2 4.5 5.7 8.0 China 2.8 2.8 10.1 12.1 8.6 9.3 11.7 3.4 6.2 Africa 2.2 2.2 1.1 8.1 1.3 -1.2 4.3 4.0 1.4 Middle-income countries 3.4 2.9 1.7 8.4 5.6 0.3 7.5 6.6 2.4 Oil exporters 3.9 2.0 2.2 8.3 5.2 -2.3 7.4 7.9 4.9 Oil importers 3.1 3.3 1.4 8.5 5.9 1.8 7.5 6.0 1.6 Major exporters of manufactures 3.0 3.2 1.6 9.2 6.4 2.1 8.1 6.2 3.8 High-income oil exporters 2.0 2.9 -16.4 27.4 Industrial market economies 1.7 0.9 0.4 5.1 2.3 1.0 4.6 3.3 2.4 156 Table A.7 Consumption, savings, and investment indicators, selected years, 1965-84 (peivent of GDP) Country group and indicator 1965 1973 1980 1981 1982 1983 1984 Developing countries Consumption 79.8 76.7 75.6 77.2 78.1 78.0 76.9 Investment 21.1 24.1 26.7 26.0 24.6 22.9 22.3 Savings 20.2 23.3 24.4 22.8 21.9 22.0 23.1 Low-income Asia Consumption 79.8 75.4 75.8 76.8 75.8 75.5 75.7 Investment 21.3 24.8 27.2 25.4 25.7 26.1 26.5 Savings 20.2 24.6 24.2 23.2 24.2 24.5 24.3 Low-income Africa Consumption 88.6 85.7 91.0 91.6 93.1 92.8 95.7 Investment 14.2 17.0 19.2 18.5 16.9 15.3 11.8 Savings 11.4 14.3 9.0 8.4 6.9 7.2 4.3 Middle-income oil importers Consumption 79.1 77.0 77.2 78.5 79.4 79.7 78.3 Investment 22.0 24.9 26.9 25.9 23.8 21.7 20.5 Savings 20.9 23.0 22.8 21.5 20.6 20.3 21.7 Middle-income oil exporters Consumption 79.9 76.8 71.0 74.0 76.4 76,0 75.3 Investment 19.8 22.3 26.7 27.6 25.4 22.8 21.6 Savings 20.1 23.2 29.0 26.0 23.6 24.0 24.7 Industrial market economies Consumption 76.7 75.0 78.4 78.4 80.1 80.3 81.1 Investment 22.9 24.7 22.5 21.9 20.1 19.6 19,6 Savings 23.3 25.0 21.6 21.6 19.9 19.7 18.9 a. Estimated. 157 Table A.8 Growth of exports, 1965-85 Average annual change in export volume (percent) Country group and commodity 1965-73 1973-80 1981 1982 1983 1984 1985-' Export volume, by commodity Developing countries Manufactures 11.6 13.8 8.6 0.1 10.0 16.6 3.3 Food 3.3 3.9 9.7 -2.3 -1.1 7.6 3.9 Nonfood 3.1 1.1 2.5 -1.6 1.5 1.0 4.5 Metalsandminerals 4.8 7.0 -2.6 -2.8 0.5 3.4 4.8 Fuels 4.0 -0.8 -9.2 0.6 2.3 7.1 -1.4 World, excluding nonmarket industrial economies Manufactures 10.2 5.9 4.2 -2.4 4.8 11.1 4.2 Food 4.7 5.9 8.7 1.6 -0.1 7.8 -3.2 Nonfood 3.4 4.0 3.7 -2.0 -1.1 5.4 0.7 Metals and minerals 6.9 8.5 -14.0 -6.4 4.6 4.9 2.8 Fuels 9.1 -0.8 -12.1 -6.8 -2.4 2.1 0.6 Export volume, by country group Developing countries 5.0 4.6 2.1 -0.5 4.7 10.7 2.3 Manufactures 11.6 13.8 8.6 0.1 10.0 16.6 3.3 Primary goods 3.8 1.1 -2.0 -0.9 1.0 6.2 1.5 Low-income countries 1.9 5.4 5.9 3.1 5.8 6.3 3.5 Manufactures 2.3 8.3 11.0 2.8 10.7 9.2 2.7 Primary goods 1.6 3.6 2.4 3.3 2.1 4.0 4.1 Asia 0.6 6.8 9.1 6.3 7.2 6.6 3.8 Manufactures 2.0 8.7 12.6 3.1 11.0 9.4 2.6 Primary goods -0.6 5.2 5.4 9.9 3.2 3.5 5.1 Africa 4.6 1.3 -4.5 -9.3 -0.2 4.9 2.0 Manufactures 5.4 2.0 -20.1 -5.4 2.8 3.1 6.7 Primary goods 4.5 1.2 -3.1 -9.6 -0.4 5.0 1.7 Middle-incomeoiimporters 7.1 9.0 7.4 -0.4 5.0 12.8 3.7 Manufactures 15.5 15.3 7.9 -0.4 8.6 17.0 3.2 Primary goods 3.8 3.3 6.8 -0.4 -0.1 6.0 4.6 Major manufacturing exporters 9.2 10.6 8.1 -1.2 6.6 13.1 3.2 Manufactures 15.6 15.9 7.5 -1.3 8.9 16.4 2.7 Primary goods 5.5 3.8 9.5 -1.1 2.0 5.9 4.5 Other middle-income oil importers 2.4 3.5 4.3 3.7 -2.1 11.5 6.0 Manufactures 14.8 9.1 14.4 12.6 4.7 25.7 8.7 Primary goods 1.2 2.4 1.6 1.1 -4.4 6.3 4.8 Middle-income oil exporters 4.3 0.0 -7.2 -1.9 3.6 8.6 -0.8 Manufactures 10.7 8.0 13.7 1.9 27.2 25.2 5.1 Primary goods 4.2 -0.4 -8.6 -2.2 1.6 6.8 -1.5 High-income oil exporters 12.7 0.0 -10.6 -25.0 -16.6 -0.5 -4.3 Industrial market economies 9.2 5.5 2.4 -1.6 3.2 9.1 4.0 World, excluding nonmarket industrial economies 8.8 3.9 0.1 -3.0 2.6 8.6 2.5 Estimated. Projected. 158 Table A.9 Change in export prices and in terms of trade, 1965-85 (average annual percentage change) Country group 1965-73 1973-80 1981 1982 1983 1984 1985b Change in export prices Developing countries 6.3 14.2 0.6 -4.7 -3.7 -1.2 -2.2 Manufactures 7.2 8.1 0.2 -3.2 -2.5 -1.9 1.3 Food 5.0 9.6 -8.2 -8.8 5.6 2.0 -8.1 Nonfood 4.2 10.5 -14.4 -8.6 5.7 -2.0 -10.0 Metalsandminerals 2.4 4.8 -7.6 -8.5 -0.1 -1.7 -4.9 Fuels 7.9 27.2 12.5 -3.2 -12.4 -2.1 -2.5 High-income oil exporters 7.7 25.9 14.0 -0.9 -14.2 -2.1 -4.5 Industrial countries Total 4.9 10.9 -4.0 -4.2 -3.3 -3.4 0.0 Manufactures 4.7 10.6 -6.0 -2.1 -4.3 -3.4 1.3 Change in terms of trade Developing countries 0.8 1.5 -1.0 -0.1 -1.3 0.4 -1.1 Low-income countries 2.3 -2.3 -1.7 1.2 0.0 2.1 -2.4 Asia 3.2 -2.4 1.1 1.2 -1.2 1.5 -1.9 Africa 0.1 -1.8 -11.8 -0.9 4.8 5.0 -5.6 Middle-incomeoilimporters 0.0 -3.0 -4.4 -0.6 2.3 0.1 -0.1 Middle-incomeoilexporters -0.4 8.5 5.4 0.2 -7.7 0.3 -2.9 High-income oil exporters 2.1 13.2 19.9 1.9 -11.0 0.7 -4.2 Industrial countries 0.3 -1.6 -1.0 2.0 1.0 -1.0 2.0 a. Estimated. b. Projected. Table A.10 Growth of long-term debt of developing countries, 1970-85 (average annual percentage change) Country group 1970-73 1973-80 1981 1982 1983 1984 1985" Developing countries Debtoutstandinganddisbursed 18.4 21.0 14.1 12.2 14.0 7.0 5.6 Official 15.6 17.3 10.5 10.8 10.3 8.2 9.0 Private 20.9 23.6 16.2 12.9 16.0 6.4 3.8 Low-income countries Debtoutstandinganddisbursed 13.2 16.3 6.5 9.3 8.6 4.6 11.0 Official 12.8 14.5 8.2 10.7 10.1 4.4 8.1 Private 16.0 25.4 0.2 3.8 2.7 5.6 23.2 Asia Debt outstanding and disbursed 11.3 13.5 4.4 10.7 9.4 7.3 12.8 Official 11.8 11.4 6.2 10.3 8.0 5.0 11.1 Private 4.1 33.6 -4.5 13.0 16.4 18.0 19.8 Africa Debtoutstandinganddisbursed 20.0 23.2 10.2 6.9 7.2 -0.1 7.5 Official 17.8 24.9 12.5 11.7 14.1 3.4 2.4 Private 24.2 19.9 5.1 -4.9 -12.6 -13.0 30.2 Middle-income oil importers Debt outstanding and disbursed 19.5 21.0 15.6 12.9 11.4 7.5 7.4 Official 17.8 18.2 13.4 11.7 12.7 11.2 10.1 Private 20.5 22.3 16.6 13.4 10.9 6.0 6.2 Major exporters of manufactures Debt outstanding and disbursed 22.3 20.8 15.7 12.7 12.1 7.7 7.7 Official 21.0 18.1 12.3 9.9 11.3 13.4 9.8 Private 22.7 21.7 16.6 13.5 12.3 6.2 7.1 Other middle-income oil importers Debtoutstandinganddisbursed 13.5 21.4 15.5 13.3 9.9 7.1 6.5 Official 14.6 18.4 14.6 13.6 14.2 8.9 10.5 Private 12.1 25.0 16.4 13.0 6.0 5.3 2.4 Middle-income oil exporters Debtoutstandinganddisbursed 20.1 23.6 14.8 12.1 20.8 7.0 0.8 Official 16.2 19.6 8.1 9.5 6.2 6.9 7.9 Private 22.7 25.8 17.8 13.1 26.5 .7.1 -1.5 The increase in debt outstanding and disbursed and the shift from private to official sources are due in part to the impact of rescheduling. Estimated. 159 Table A.11 Savings, investment, and the current account balance, 1965-84 (percent) Gross domestic investment/GNP Gross national savingslGNP Current account balance/GNP Country 1965-72 1973-78 1979-84 1965-72 1973-78 1979-84 1965-72 1973-78 1979-84 Latin America and Caribbean *Argentina 20.4 24.6 19.3 20.3 26.2 16.7 -0.1 1.6 -2.6 Bolivia 17.5 21.1 13.6 12.9 16.4 3.4 -4.6 -4.7 -10.2 *Brazil 25.8 28.1 21.1 24.0 24.0 16.9 -0.8 -4.1 -4.2 *Chile 15.3 15.3 16.9 13.0 11.9 6.7 -2.3 -3.4 -10.2 Colombia 19.0 18.8 20.0 15.4 19.1 15.3 -3.6 -0.3 -4.7 Costa Rica 21.2 24.5 25.3 11.9 13.7 10.6 -9.3 -10.8 -14.7 Ecuador 18.6 26.4 23.9 11.3 20.4 19.6 -7.3 -6.0 -4.3 Guatemala 13.2 19.3 14.6 10.2 14.8 9.8 -3.0 -4.5 -4.8 Jamaica 32.2 21.0 21.9 22.3 13.2 6.1 -9.9 -7.8 -15.8 *Mexico 21.3 23.4 25.9 19.2 20.2 24.0 -2.1 -3.2 -1.9 Peru 17.3 18.0 16.8 15.9 10.5 12.9 -1.4 -7.5 -3.9 Uruguay 11.9 14.4 15.0 11.8 10.6 10.1 -0.1 -3.8 -4.9 *Venezuela 29.3 35.4 22.4 29.8 36.1 26.4 0.5 0.7 4.0 Africa Cameroon 15.9 22.0 25.7 11.9 18.8 24.7 -4.0 -3.2 -1.0 Côted'Ivoire 21.3 26.8 25.9 15.6 24.8 12.5 -5.7 -2.0 -13.4 Ethiopia 13.1 9.5 10.6 10.7 7.6 3.1 -2.4 -1.9 -7.5 Ghana 12.4 10.0 5.0 8.8 9.1 4.2 -4.3 -0.9 -0.8 Kenya 21.7 25.4 25.2 17.0 17.3 15.3 -4.7 -8.1 -9.9 Liberia 24.7 33.9 26.2 23.6 16.7 9.0 -1.1 -17.2 -17.2 Malawi 19.6 29.8 24.4 4.6 17.9 11.2 -15.0 -11.9 -13.2 Niger 15.9 29.3 29.5 6.5 12.3 13.0 -9.4 -17.1 -16.5 Nigeria 20.0 28.0 21.9 15.2 28.8 19.8 -4.8 0.8 -2.1 Senegal 13.7 18.6 17.1 6.8 7.4 -2.7 -6.9 -11.2 -19.8 Sierra Leone 14.0 13.2 12.3 8.0 3.1 0.0 -6.0 -10.1 -12.3 Sudan 11.9 17.3 15.7 11.0 9.1 0.4 -0.9 -8.2 -15.3 Tanzania 19.7 20.5 21.2 17.5 11.3 9.3 -2.2 -9.2 -11.9 Zaire 27.7 29.8 23.4 20.9 9.9 19.0 -6.8 -19.9 -4.4 Zambia 31.9 31.4 18.4 39.1 27.0 8.1 7.2 -4.4 -10.3 South Asia *lndia 18.3 21.7 24.6 13.4 19.2 21.6 4.9 2.5 -3.0 Pakistan 16.3 15.9 15.8 10.2 10.0 12.1 -6.1 -5.9 -3.7 Sri Lanka 16.1 16.2 29.2 11.3 11.9 12.5 -4.8 -4.3 -16.7 East Asia *Indonesia 12.6 20.6 22.8 6.9 18.8 34.2 -5.7 -1.8 11.4 *Korea 24.1 29.0 30.0 15.3 24.6 27.8 -8.8 -4.4 -2.2 Malaysia 19.8 25.3 33.6 20.8 26.7 26.8 1.0 1.5 -6.8 PapuaNewGuinea 31.0 20.1 29.0 1.8 16.7 10.2 -29.2 -3.4 -18.8 Philippines 20.7 28.0 28.0 18.5 23.5 21.9 -2.2 -4.5 -6.1 Thailand 23.8 25.4 24.9 21.1 21.3 18.3 -2.7 -4.1 -6.6 Europe and North Africa Algeria 30.2 48.3 39.7 25.8 39.0 38.0 -4.4 -9.3 -1.7 *Egypt 14.1 26.1 28.3 8.8 17.4 16.6 -5.3 -8.7 -11.7 Morocco 14.5 24.9 22.3 12.5 16.5 12.2 -2.0 -8.4 -10.1 Portugal 25.9 28.2 33.3 21.5 14.7 13.5 -4.4 -13.5 -19.8 Tunisia 23.7 28.8 30.7 16.1 21.5 22.7 -7.6 -7.3 -8.0 *Turkey 18.0 21.9 20.3 17.1 17.9 16.1 -0.9 -4.0 -4.2 *Yugoslavia 30.2 33.1 35.2 27.6 27.3 30.0 -2.6 -5.8 -5.2 Note: Asterisk indicates a major borrower. a. Excluding net unrequited transfers. 160 Table A.12 Composition of debt outstanding, 1970-84 (percent of total debt) Debt from official sources Debt from private sources Debt at floating rates Country 1970-72 1980-82 1984 1970-72 1980-82 1984 1973-75 1980-82 1984 Latin America and Caribbean *Argentina 12.6 8.8 9.2 87.4 91.2 90.8 13.9 53.7 37.5 Bolivia 58.7 52.6 65.3 41.3 47.4 34.7 7.5 35.7 29.0 *Brazil 29.7 11.8 13.8 70.3 88.2 86.2 43.5 66.0 79.1 *Chile 47.2 10.5 8.8 52.8 89.5 91.2 9.6 58.1 81.2 Colombia 68.0 45.3 43.1 32.0 54.7 56.9 6.2 39.4 42.7 Costa Rica 39.9 37.6 39.8 60.1 62.4 60.2 24.6 50.2 56.9 Ecuador 51.1 31.0 27.9 48.9 69.0 72.1 12.7 50.9 71.5 Guatemala 47.6 71.9 72.9 52.4 28.1 27.1 5.2 8.6 20.3 Jamaica 7.4 66.3 76.0 92.6 33.7 24.0 35.7 22.6 21.9 *Mexico 19.5 11.1 8.8 80.5 88.9 91.2 46.9 74.3 83.0 Peru 15.7 40.3 38.4 84.3 59.7 61.6 31.0 28.2 40.6 Uruguay 48.7 20.8 15.3 51.3 79.2 84.7 11.6 33.5 66.4 *Venezuela 28.5 2.4 0.7 71.5 97.6 99.3 20.6 81.4 93.8 Africa Cameroon 81.6 57.0 58.2 18.4 43.0 41.8 2.0 12.3 5.7 Côte d'Ivoire 51.3 23.3 32.1 48.7 76.7 67.9 20.5 43.5 51.3 Ethiopia 87.8 92.4 86.9 12.2 7.6 13.1 1.5 2.1 7.7 Ghana 57.3 82.5 88.7 42.7 17.5 11.3 0.0 0.0 0.0 Kenya 58.4 52.6 70.2 41.6 47.4 29.8 3.3 11.8 6.6 Liberia 80.3 74.7 78.7 19.7 25.3 21.3 0.0 15.9 16.7 Malawi 77.5 67.8 82.5 22.5 32.2 17.5 2.3 21.2 12.8 Niger 96.5 42.4 62.1 3.5 57.6 37.9 0.0 20.2 16.1 Nigeria 70.2 15.1 17.2 29.8 84.9 82.8 0.7 65.8 56.0 Senegal 59.0 70.7 86.8 41.0 29.3 13.2 26.0 8.8 7.4 Sierra Leone 61.0 70.3 73.9 39.0 29.7 26.1 3.8 0.1 0.6 Sudan 86.3 74.4 83.3 13.7 25.6 16.7 2.2 10.2 2.9 Tanzania 63.6 76.6 80.3 36.4 23.4 19.7 0.4 0.6 0.4 Zaire 24.5 65.7 82.4 75.5 34.3 17.6 32.8 11.8 8.8 Zambia 22.0 70.6 76.7 78.0 29.4 23.3 22.6 10.0 17.4 South Asia *India 95.2 91.5 79.6 4.8 8.5 20.4 0.0 3.1 7.9 Pakistan 90.9 92.4 90.7 9.1 7.6 9.3 0.0 3.1 6.8 Sri Lanka 81.8 79.6 72.8 18.2 20.4 27.2 0.0 11.9 14.7 East Asia *Indonesia 71.5 51.7 48.1 28.5 48.3 51.9 10.2 18.2 23.6 *Korea 37.8 35.3 32.3 62.2 64.7 67.7 15.6 35.2 46.8 Malaysia 49.1 21.6 16.4 50.9 78.4 83.6 23.0 47.3 61.6 Papua New Guinea 7.2 23.9 20.8 92.8 76.1 79.2 0.0 37.4 46.3 Philippines 21.4 32.4 37.8 78.6 67.6 62.2 18.8 39.5 41.0 Thailand 40.1 40.1 43.6 59.9 59.9 56.4 0.9 30.7 29.4 Europe and North Africa Algeria 45.0 16.7 21.2 55.0 83.3 78.8 34.0 24.2 26.4 *Egypt 66.0 82.2 80.8 34.0 17.8 19.2 3.1 3.2 1.7 Morocco 79.2 52.0 62.7 20.8 48.0 37.3 2.7 31.9 31.4 Portugal 39.1 25.7 24.6 60.9 74.3 75.4 0.0 23.5 31.5 Tunisia 72.4 62.4 69.2 27.6 37.6 30.8 0.0 14.1 15.5 *Turkey 92.1 65.7 68.0 7.9 34.3 32.0 0.8 22.7 28.5 *Yugoslavia 37.3 24.1 25.7 62.7 75.9 74.3 7.6 31.8 56.0 Note: Asterisk indicates a major borrower. a. Percent of public debt. 161 Bibliographical note This Report has drawn on a wide range of World in Johnson 1973. Box 1.2 is based on Smith 1776, Bank reports, as well as on numerous outside Sen 1981, and Sen 1986. Box 1.3 is based on a con- sources. World Bank sources include ongoing eco- tribution from Johnson; see also Anderson 1983, nomic analysis and research, as well as project and Anderson, Hayami, and Honma 1986, Johnson sector work on individual countries. Outside 1985a, and Johnson 1985b. sources include research publications and reports, published and unpublished, of other organizations Chapters 2 and 3 working on global economic and development is- sues. The principal sources used in each chapter Data used in these chapters were obtained from are briefly noted below. These and other sources GATF, IMF, OECD, and UNCTAD publications as are then listed alphabetically by author or organi- well as World Bank sources. The discussion of zation in two groups: background papers and developing-country debt relies on published notes commissioned for this Report and a selected World Bank reportsin particular, World Bank bibliography. The background papers, some of 1986a and 1986c. The discussion of real exchange which will be made available through future publi- rates in Chapter 2 relies on the background papers cations, synthesize relevant literature and Bank by Cavallo, Cottani, and Khan; and Harberger. work. The views they express are not necessarily The discussion in Chapter 3 of macroeconomic pol- those of the World Bank or this Report. icies for growth in developing countries is based In addition to the sources listed, many persons on the background papers by Balassa and Buiter. in and outside the World Bank helped prepare this Boxes 2.2, 2.4, and 3.2 draw on papers by Kalan- Report by writing informal notes or by providing tzopoulos, Harberger, and Fleisig, respectively. extensive comments. Among these were Paul Ar- mington (Box 3.4), Bela Balassa (Chapters 2-4), El- Chapters 4 and 5 liot Berg (Chapters 4 and 5), Dipak Dasgupta (Box 5.9), Isabel Guerrero (Box 2.3), Ralph Hanan (Box These chapters draw heavily on the World Bank's 4.8), D. Gale Johnson (Chapters 1 and 4-8), John operational experience, country and sector eco- Joyce (Box 5.6), Ulrich Koester (Chapters 6 and 7), nomic work, and various contributions from the Ernesto May (Chapter 4), Yair Mundlak (Chapter Bank's operational staff. In Chapter 4, the princi- 4), John Nash (Chapter 5), Shlomo Reutlinger pal sources for the discussion of exchange rates (Chapter 5), Jayasankar Shivakumar (Box 5.10), G. and agriculture were the background papers by Edward Schuh (Chapters 1-8), Lyn Squire (Chap- Balassa, Cavallo, Harberger, and Kerr; on supply ter 4), and Vinod Thomas (Box 4.1). However, responses, the sources were the paper by none of the above is responsible for the views ex- Mundlak, Mundlak 1979, and Cavallo and pressed in the Report. Mundlak 1982; on the linkages between agricul- ture and industry, the sources were Hazell and Chapter 1 Roell 1983 and Rangarajan 1982. The taxation anal- ysis and Box 4.10 are partially based on the paper Primary data sources for this chapter are FAO pub- by Squire. For a discussion of how this analysis lications and World Bank files. Two key references relates to public spending policies, see Ray 1984 on nominal protection coefficients are Scandizzo (pp. 86, 92-99). Box 4.4 is based on the papers by and Bruce 1980 and Binswanger and Scandizzo Pinto and Pearson and Dorosch, Box 4.5 on the 1983. On the pattern of protection and the effi- papers by Ellis and Raswant, and Box 4.9 on the ciency of world agriculture, a comparable thesis is paper by Ueno. 162 The section on marketing and price stabilization "Public Sector Support Programs for Agriculture: in Chapter 5 draws on the papers by Jones, Knud- A Case Study of the Rubber Sector in Thailand." sen and Nash, and Lewis as well as on Bates 1981 Bucci, Gabriella. "The Effects of Abolishing Major Nontariff Barriers on Intra-OECD Trade." and Bauer 1954. The section on producer support Buiter, Willem H. "Macroeconomic Responses by Develop- policies is primarily based on the background pa- ing Countries to Changes in External Economic Condi- pers by Berg, Vogel, and Virmani as well as on tions." Binswanger 1984, Hanson and Neal 1985, Virmani Cavallo, Domingo F. "Exchange Rate Overvaluation and 1982, and Virmani 1985. The discussion of the re- Agriculture: The Case of Argentina." forms in China is based on the paper by Lardy. Box Cavallo, Domingo F., Joaquin Cottani, and M. Shahbaz 5.2 draws on Krishna and Chhibber 1983, and Box Khan. "Real Exchange Rate Behavior and Economic Per- formance in LDC's." 5.6 on Mathew 1984. Chhibber, Ajay. "Trade and Exchange Rate Policies and Ag- ricultural Performance in LDC's." Chapters 6 and 7 Ellis, Frank. "Agricultural Price Policy in Tanzania." The estimates of nominal rates of protection and Fleisig, Heywood. "How a $10 per Barrel Oil Price Drop Would Affect the Developing Countries." nontariff barriers use World Bank data and the Ty- Gardner, Bruce. "Economic Consequences of U.S. Agricul- ers and Anderson background paper on distor- tural Policies." tions in world food markets. The discussion of pol- "Estimating Effects of Commodity Policy and icies in the OECD countries is based largely on Trade Liberalization in Agriculture." background papers by Gardner, Johnson, and "International Commodity Agreements." Koester and Tangermann and on the following Harberger, Arnold C. "Reacting to a Debt Crisis." publications: Bale and Lutz 1981, Barichello 1986, "The Real Exchange Rate." Johnson, D. Gale. "Agricultural Protection: Japan, Canada Buckwell and others 1982, Harling 1983, Hayami and Australia." and Honma 1983, Josling 1980, and Schuh 1974. "Import Restrictions: Tariff and Non-Tariff Barri- The simulation of the results of trade liberalization ers." draws primarily on the background paper by Tyers "Notes on Agricultural Policy Trends and Priori- and Anderson and on Valdes and Zietz 1980. The ties." discussion of price stability under trade liberaliza- "Trade Preferences." tion is based on Johnson and Sumner 1976 and Jones, William 0. "Agricultural Marketing Boards in Tropi- cal Africa." Schiff 1983. Box 6.6 is based on Phipps 1985 and Kalantzopoulos, Orsalia. "The Costs of Voluntary Export Traill 1980. In Chapter 7, the section on interna- Restraints for Selected Industries in the U.S. and EEC." tional commodity agreements and Box 7.1 are "The Effects on World Trade of a Decrease in based on the background papers by Gardner and Post-Tokyo Round Tariffs and Major Nontariff Barriers." MacBean and Nguyen as well as on Gilbert 1984 Kerr, 1. C. "Trends in Agricultural Price Protection, 1967- and UNCTAD sources. The section on compensa- 83. tory finance is based on material from the IMF and Knudsen, Odin, and John Nash. "Lessons from Price Stabi- lization Schemes in Developing Countries." on the paper by Koester and Herrmann. The prin- Koester, Ulrich, and Roland Herrmann. "The EEC-ACP cipal source for the discussion of the EC's trade Convention of Lomé." preferences and for Boxes 7.3 and 7.4 is again the Koester, Ulrich, and Stefan Tangermann. "European Agri- paper by Koester and Herrmann. The paper by cultural Policies and International Agriculture." Johnson covers other types of preference schemes. Lardy, Nicholas. "Agricultural Reform in China." Lewis, Clifford M. "Managing Agricultural Risks." Background papers MacBean, Alasdair, and Duc Tin Nguyen. "Commodity Price Instability: Evidence." Anderson, Kym, and Rodney Tyers. "China's Economic "Compensatory Financing." Growth and Re-entry into World Markets: Implications "Prospects for Processing Agricultural Products for Agricultural Trade." in Developing Countries." Balassa, Bela. "Economic Incentives and Agricultural Ex- "Terms of Trade: The Facts." ports in Developing Countries." "The NIEO Proposals on Food and Trade in Agri- "Incentive Policies and Agricultural Performance culture." in Sub-Saharan Africa." Meyers, Kenneth. "Agricultural Performance and Policy in Berg, Elliot. "Economic Issues in Fertilizer Subsidies in De- Kenya." veloping Countries." "Agricultural Performance and Policy in Tanza- Bertrand, Trent. "Agricultural Taxation and Subsidy Policies nia." in the Agricultural Sector in Sri Lanka." Minford, Patrick. "Assessment of Policy Scenarios Using "Issues Concerning the Scope and Design of Pub- the Liverpool World Model." lic Sector Support Programs for Agriculture." Mundlak, Yair. "The Aggregate Agricultural Supply." 163 Pearson, Scott R., and Paul A. Dorosh. "Macroeconomic izing World Trade. Development Policy Issues Series. Re- Policy and Agricultural Development in Indonesia: How port VPERS4. Washington, D.C.: World Bank, Office of an Oil-Exporting Country Achieved Food Self- the Vice President. Sufficiency." Bale, Malcolm D., and B. L. Greenshields. 1978. "Japanese Pinto, Brian. "Nigeria during and after the Oil Boom: A Agricultural Distortions and Their Welfare Value." Ameri- Policy Comparison with Indonesia." can Journal of Agricultural Economics 60, 1:59-64. Raswant, V "The Impact of Parallel Markets on Agricul- Bale, Malcolm D., and Ernst Lutz. 1978. Trade Restrictions and ture." International Price Instability. World Bank Staff Working Pa- Scobie, Grant M. "Food Consumption Policies." per 303. Washington, D.C. Sherbourne, Lynn. "Macroeconomic Policies and Agricul- 1981. "Price Distortions in Agriculture and Their tural Performance: Ghana." Effects: An International Comparison." American Journal of "Macroeconomic Policies and Agricultural Perfor- Agricultural Economics 63, 1:8-22. mance: Ivory Coast." Barichello, Richard. 1986. "Government Policies in Support Squire, Lyn. "Agricultural Pricing in Malawi." of Canadian Agriculture: Their Costs." In T. Kelly White Stryker, J. Dirck, and Lewis E. Brandt. "Price Policy in Af- and C. Hanrahan, eds. Consortium on Trade Research and rica." Agriculture: A Comparative Look at U.S., Canadian, and EC Subbarao, K. "India's Agricultural Performance and Policy: Policies. Report AGES850208. Washington, D.C.: U.S. De- A Note." partment of Agriculture, Economic Research Service. Tyers, Rodney, and Kym Anderson. "Distortions in World Barker, Randolph, Robert W. Herdt, and Beth Rose. 1985. Food Markets: A Quantitative Assessment." The Rice Economy of Asia. Washington, D.C.: Resources for Ueno, Hiroshi. "Intersectoral Factor Transfers: Case of Ja- the Future. pan." Bates, Robert H. 1981. Markets and States in Tropical Africa: Vaubel, Roland. "Would the Developing Countries Benefit The Political Basis of Agricultural Politics. Berkeley: Univer- from a New International Monetary System?" sity of California. Virmani, Arvind. "Credit Markets and Credit Policy in De- Bauer, P. T. 1954. West African Trade. London: Routledge & veloping Countries: Myths and Reality." Kegan Paul. Vogel, Robert. "Government Intervention in Rural Financial Bautista, Romeo M. 1985. "Effects of Trade and Exchange Markets." Rate Policies on Export Production Incentives in Philip- pine Agriculture." Washington, D.C.: International Food Policy Research Institute. Processed. 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Washington, D.C. Zietz, Joachim, and Alberto Valdes. 1986. The Costs of Protec- Webb, A. J. 1984. Protection in Agricultural Markets. Economic tionism to Developing Countries: An Analysis for Selected Agri- Research Service Staff Report AGES840524. Washington, cultural Products. World Bank Staff Working Paper 769. D.C.: U.S. Department of Agriculture. Washington, D.C. 168 World Development Indicators Contents Key 174 Introduction 175 Maps 176 Table 1. Basic indicators 180 Population LI Area LI GNP per capita LI Inflation LI Life expectancy Table 2. Growth of production 182 GDP LI Agriculture LI Industry U Manufacturing U Services Table 3. Structure of production 184 GDP LI Agriculture LI Industry U Manufacturing LI Services Table 4. Growth of consumption and investment 186 General government consumption LI Private consumption LI Gross domestic investment Table 5. Structure of demand 188 General government consumption U Private consumption U Gross domestic investment LI Gross domestic savings LI Exports of goods and nonf actor services LI Resource balance Table 6. Agriculture and food 190 Value added LI Cereal imports LI Food aid LI Fertilizer consumption LI Food production per capita Table 7. Industry 192 Share of value added in food and agriculture LI in textiles and clothing LI in machinery and transport equipment LI in chemicals LI in other manufacturing LI Value added in manufacturing Table 8. Commercial energy 194 Growth of energy production LI Growth of energy consumption LI Energy consumption per capita LI Energy imports as percentage of merchandise exports Table 9. Growth of merchandise trade 196 Export values LI Import values LI Growth of exports LI Growth of imports LI Terms of trade 171 Table 10. Structure of merchandise exports 198 Fuels, minerals, and metals LI Other primary commodities U Textiles and clothing U Machinery and transport equipment El Other manufactures Table 11. Structure of merchandise imports 200 Food U Fuels LI Other primary commodities LI Machinery and transport equipment LI Other manufactures Table 12. Origin and destination of merchandise exports 202 Industrial market economies LI East European nonmarket economies U High-income oil exporters LI Developing economies Table 13. Origin and destination of manufactured exports 204 Industrial market economies LI East European nonmarket economies U High-income oil exporters U Developing economies LI Value of manufactured exports Table 14. Balance of payments and reserves 206 Current account balance LI Receipts of workers' remittances LI Net direct private investment LI Gross international reserves U in months of import coverage Table 15. Gross external liabilities 208 Long-term public and publicly guaranteed debt LI Long-term private nonguaranteed debt LI Use of IMF credit LI Short-term debt LI Total gross external liabilities Table 16. Flow of public and private external capital 210 Public, publicly guaranteed, and private nonguaranteed long-term loans U gross inflow LI repayment of principal LI net inflow Table 17. Total external public and private debt and debt service ratios 212 Total long-term debt disbursed and outstanding LI as percentage of GNP U Total interest payments on long-term debt U Total long-term debt service as percentage of GNP LI as percentage of exports of goods and services Table 18. External public debt and debt service ratios 214 External public debt outstanding and disbursed LI as percentage of GNP LI Interest payments on external public debt LI Debt service as percentage of GNP U as percentage of exports of goods and services Table 19. Terms of external public borrowing 216 Commitments U Average interesf rate LI Average maturity LI Average grace period U Public loans with variable interest rates, as percentage of public debt Table 20. Official development assistance from OECD and OPEC members 218 Amount in dollars LI as percentage of donor GNP LI in national currencies LI Net bilateral flows to low-income economies as percentage of donor GNP 172 Table 21. Official development assistance: receipts 220 Net disbursements LI per capita LI as percentage of GNP Table 22. Central government expenditure 222 Defense LI Education LI Health LI Housing and community amenities; social security and welfare LI Economic services LI Other LI Total expenditure as percentage of GNP LI Overall surplus/deficit as percentage of GNP Table 23. Central government current revenue 224 Tax revenue LI Current nontax revenue LI Total current revenue as percentage of GNP Table 24. Income distribution 226 Percentage share of household income, by percentile groups of households Table 25. Population growth and projections 228 Population growth LI Population size LI Hypothetical size of stationary population LI Assumed year of reaching net reproduction rate of 1 LI Population momentum Table 26. Demography and fertility 230 Crude birth rate LI Crude death rate LI Total fertility rate LI Percentage of married women using contraception Table 27. Life expectancy and related indicators 232 Life expectancy LI Infant mortality rate LI Child death rate Table 28. Health-related indicators 234 Population per physician LI per nursing person LI Daily calorie supply per capita Table 29. Education 236 Number enrolled as percentage of age group LI in primary school E in secondary school El in higher education Table 30. Labor force 238 Population of working age LI Labor force in. agriculture LI in industry LI in services LI Growth of labor force, past and projected Table 31. Urbanization 240 Urban population as percentage of total population LI Growth of urban population LI Percentage in largest city LI in cities of over 500,000 persons LI Number of cities of over 500,000 persons Technical notes 242 Box A.1 Basic indicator table for small countries 243 Bibliography of data sources 256 173 Key In each table, economies are listed in their Figures in the colored bands are Not available. group in ascending order of GNP per cap- summary measures for groups of ita except for those for which no GNP per economies. The letter wafter a (.) Less than half the unit shown. capita can be calculated. These are listed in summary measure indicates that it is All growth rates are in real terms. alphabetical order, in italics, at the end of a weighted average; the letter m, their group. The reference numbers below that it is a median value; Figures in italics are for years or periods reflect the order in the tables. the letter t, that it is a total. other than those specified. Afghanistan 30 Haiti 23 Panama 81 Albania 123 Honduras 48 Papua New Guinea 50 Algeria 88 Hong Kong 92 Paraguay 67 Angola 72 Hungary 121 Peru 59 Argentina 86 India 15 Philippines 46 Australia 115 Indonesia 42 Poland 122 Austria 108 Iran, Islamic Republic of 95 Portugal 79 Bangladesh 2 Iraq 96 Romania 127 Belgium 107 Ireland 103 Rwanda 19 Benin 18 Israel 91 Saudi Arabia 99 Bhutan 31 Italy 104 Senegal 29 Bolivia 41 Jamaica 63 Sierra Leone 22 Botswana 57 Japan 111 Singapore 94 Brazil 78 Jordan 70 Somalia 17 Bulgaria 124 Kampuchea, Democratic 33 South Africa 87 Burkina Faso 5 Kenya 21 Spain 102 Burma 7 Korea, Democratic People's Sri Lanka 26 Burundi 11 Republic of 74 Sudan 27 Cameroon 54 Korea, Republic of 84 Sweden 116 Canada 117 Kuwait 100 Switzerland 120 Central African Republic 14 Lao People's Democratic Republic 34 Syrian Arab Republic 71 Chad 32 Lebanon 75 Tanzania 10 Chile 77 Lesotho 40 Thailand 56 China 20 Liberia 38 Togo 13 Colombia 69 Libya 98 Trinidad and Tobago 93 Congo, People's Republic of the 61 Madagascar 16 Tunisia 68 Costa Rica 66 Malawi 8 Turkey 65 Cote d'lvoire 45 Malaysia 80 Uganda 12 Cuba 73 Mali 3 Union of Soviet Socialist Czechoslovakia 125 Mauritania 37 Republics 128 Denmark 114 Mauritius 60 United Arab Emirates 101 Dominican Republic 58 Mexico 83 United Kingdom 106 Ecuador 62 Mongolia 76 United States 119 Egypt, Arab Republic of 51 Morocco 47 Uruguay 82 El Salvador 49 Mozambique 35 Venezuela 89 Ethiopia 1 Nepal 6 Viet Nam 36 Finland 112 Netherlands 109 Yemen Arab Republic 43 France 110 New Zealand 105 Yemen, People's Democratic German Democratic Republic 126 Nicaragua 55 Republic of 44 Germany, Federal Republic of 113 Niger 9 Yugoslavia 85 Ghana 25 Nigeria 52 Zaire 4 Greece 90 Norway 118 Zambia 39 Guatemala 64 Oman 97 Zimbabwe 53 Guinea 24 Pakistan 28 Note: For U.N. and World Bank member countries with populations of less than I million, see Box Al. 174 Introduction The World Development Indicators provide infor- related to national accounts are in constant prices mation on the main features of social and eco- and are computed, unless noted otherwise, by us- nomic development. Most of the data collected by ing the least-squares method. Because this method the World Bank are on its developing member takes all observations in a period into account, the countries, Because comparable data for developed resulting growth rates reflect general trends that market economies are readily available, these are are not unduly influenced by exceptional values. also included in the indicators. Data for economies Table entries in italics indicate that they are for that are not members of the World Bank are in- years or periods other than those specified. All dol- cluded if available in a comparable form. lar figures are U.S. dollars. The various methods Every effort has been made to standardize the used for converting from national currency figures data. However, full comparability cannot be en- are described, where appropriate, in the technical sured and care must be taken in interpreting the notes. indicators. The statistics are drawn from sources Some of the differences between figures shown thought to be most authoritative, but many of in this year's and those of last year's edition reflect them are subject to considerable margins of error. not only updating but also revisions to historical Variations in national statistical practices also re- series. duce the comparability of data which should thus As in the World Development Report itself, the be construed only as indicating trends and charac- economies included in the World Development In- terizing major differences among economies, dicators are grouped into several major categories. rather than taken as precise quantitative indica- These groupings are analytically useful for distin- tions of those differences. guishing economies at different stages of develop- The indicators in Table 1 give a summary profile ment. Many of the economies included are further of economies. Data in the other tables fall into the classified by dominant characteristicsto distin- following broad areas: national accounts, agricul- guish oil importers from exporters, for instance. ture, industry, energy, external trade, external The major groups used in the tables are 36 low- debt, aid flows, other external transactions, central income developing economies with a per capita government finances and income distribution, and income of less than $400 in 1984, 60 middle-income population, health, education, labor force, and ur- developing economies with a per capita income of banization indicators. $400 or more, 5 high-income oil exporters, 19 in- The national accounts data are obtained from dustrial market economies, and 8 East European member governments by Bank missions and are, nonmarket economies. Two new countries, Bo- in some instances, adjusted to conform with inter- tswana and Mauritius, whose populations now ex- national definitions and concepts to ensure consis- ceed 1 million, are included in this year's tables. tency. Data on external debt are reported to the Note that because of the paucity of data and differ- Bank by member countries through the Debtor Re- ences in the method for computing national in- porting System. Other data sets are drawn from come, as well as difficulties of conversion, esti- the International Monetary Fund, the United Na- mates of GNP per capita for nonmarket economies tions and specialized agencies. are not generally available. Three new tables have been added this year. The format of this edition follows that used in Two, along with some additional indicators, offer a previous years. In each group, economies are more complete picture of external indebtedness, listed in ascending order of income per capita ex- while the third gives information on receipts o cept for those for which no GNP per capita figure official development assistance. can be calculated. These are listed in italics in al- For ease of reference, ratios and rates of growth phabetical order at the end of each appropriate are shown; absolute values are reported only in a group. This order is used in all tables. The alpha- few instances. Most growth rates are calculated for betical list in the key shows the reference number two periods: 1965-73 and 1973-84, or for 1973-83 if for each economy; italics once again indicate those data for 1984 are not available. All growth rates economies placed at the end of a group due to 175 unavailability of GNP per capita figures. Econo- the Saharaexcept South Africa. Because trade in mies with populations of less than a million are not oil affects the economic characteristics and perfor- reported in the main tables, but a separate table in mance of middle-income economies, summary Box A.1 shows some basic indicators for 34 small measures are shown separately for oil importers economies that are members of the United Na- and exporters and for sub-Saharan Africa. In addi- tions, the World Bank, or both. tion, the group of middle-income economies is di- In the colored bands are summary measures vided into lower and upper categories, which pro- totals or weighted averagesthat are calculated for vides more meaningful summary measures. the economy groups if data are adequate and thus The methodology used for computing the sum- meaningful statistics can be obtained. Because mary measures is described in the technical notes. China and India heavily influence the overall sum- The letter w after a summary measure indicates mary measures for the low-income economies, that it is a weighted average; the letter m, that it is summary measures are shown separately for sev- a median value; and the letter t, that it is a total. eral subgroups: China and India, sub-Saharan Af- Because the coverage of economies is not uniform rica, and other low-income economies. Note that for all indicators and because the variation from sub-Saharan Africa includes all countries south of measures of central tendency can be large, readers Groups of economies The colors on the map show what group a country has been placed in on the basis of its GNP per capita and, in some instances, its distinguishing eco- nomic characteristics. For example, all low-income economies, those with a GNP per capita of less than $400 (in 1984), are colored yellow. The groups are the same as those used in the 31 tables that follow, and they include only the 128 countries with a popula- tion of more than I million. Low-income economies Middle-income oil importers Middle-income oil exporters High-income oil exporters Industrial market economies East European nonmarket economies Not included in the Indicators TokeIaa (Nd) waldo a,oj WesIm, 2 Eutwna Samoa (Fr) 'i,e,pcan Samoa (US) ii; Frenth N,,e)NZ) P,Iyo,oia Sompnican Tonga (F,) 8obIo p0,5 5,0 (US) SI hrroIopher-N,o,o Vaqn Islands UaIgaa and Barboda (US) Mwlse,,ar (UK) oaUeloape (Fr) OaO I, P C a NaiharlapUn UCrIPI1FS Ua,Ipnpqae (Fr) (Bath) SI luUpa .Sarbadoo SI Vpnoeppt and ha enndaGranadpppa: 176 should exercise caution in comparing the summary on the following pages show population, life ex- measures for different indicators, groups, and pectancy at birth, and the share of agriculture in years or periods. gross domestic product (GDP). The Eckert IV pro- In incorporating the three new tables, the oppor- jection has been used for these maps because it tunity has been taken to rearrange other tables into maintains correct areas for all countries, though at a more logical order, keeping the economic indica- the cost of some distortions in shape, distance, and tors together and running the social indicators last. direction. The maps have been prepared exclu- The technical notes should be referred to in any use of sively for the convenience of the readers of this the data. These notes outline the methods, con- report; the denominations used and the bounda- cepts, definitions, and data sources used in com- ries shown do not imply on the part of the World piling the tables. The bibliography gives details of Bank and its affiliates any judgment on the legal the data sources, which contain comprehensive status of any territory or any endorsement or ac- definitions and descriptions of concepts used. ceptance of such boundaries. The report includes four world maps. The first The World Development Indicators are prepared map, below, shows country names and the groups under the supervision of Ramesh Chander, as- in which economies have been placed. The maps sisted by David Cieslikowski. Geeenlaud n) 2loeIand Facron Islands. (Den) - munDerrr Rep land Union of Racier Socialist Republics United Kin6 Zechonloairra Isleot Manu - Austria (UK) Irel Hungary Channel olin-eGO (UK) Yugoslavia Netherlands Belgium Lusemnibourg Fed Rep of Germany oplr.s. Swit,e,Iand Turkey Of Korea Portug Japan Gibraltar IUKI Afghanistan China SatarO Unitad Arab BanglaDesh Saudi Arabia Emleafin India Burma Hong BOyS 15K) Macan (Port) Mah Niger Lao Peoples ape Uerde- sDenn Rep (tern Rep Se gal Chad Philippines The Uunbia Arab Re p Dens el Nan SuarrlSSl Uuinea-Bissa sea Trust Territory 01 the Siesra Le Ethiopia Pacific Islands Central Sri Lanka US) Libe Aliicafl Rap ha Malaysia Ghana Maldmves Togs A Ag and a iribafu Berm Sing Pa psu a Equatorial Guinea San Tonre and Principe New Guinea Zaire Peoples Rep of the Congo Seychellen Solomon 'y Isharos Tuualu ComnonoS Angola Vannatit Ms rnbiqul Am Maunit1us Nannibia MadagSwa BelSwara Reunion lFn) New Caledoeia Australia (Fr) wapiland Africa sothO 177 Population 0-15 million The colors on the map show the gen- lation for each of 128 countries; the 15-50 million eral size of a country's population. For technical note to that table gives data 50-100 million example, countries with a population for 34 more countries with a popula- of less than 15 million are colored yel- tion of less than I million. 100+ million low. Note that Table 1 gives the popu- H Data not available Population by country group, The bar chart below shows population 1965, 1984, 2000 by country group for the years 1965 Shares of total population, 1984 and 1984 as well as projected popula- East Europeans Other Millions nonmarket 3000 tion for the year 2000. The country economies groups are those used in the map on the preceding pages and in the tables that follow. Industrial economies 2000 El 2000 [] 1984 D 1965 The pie chart above shows the propor- tion of total population, excluding coun- 1000 tries with populations of less than 1 mil- lion, accounted for by each country group. "Other" refers to high-income oil producers. 0 Low-income Middle- Industrial East European economies income economies nonmarket economies economies 178 Life expectancy 0-49 years fhe map classifies countries by life ex- 50-59 years pectancy at birththat is, by the num- 60-69 years ber of years a baby born in 1984 can expect to live. For example, life ex- 70+ years pectancy at birth is less than fifty years Data not available in countries colored yellow. Share of agriculture in GDP 0-9 percent The value added by a country's agri- nothing about absolute values of pro- 10-19 percent cultural sector divided by the gross duction. For countries with high levels domestic product gives the share of of subsistence farming, the share of 20-39 percent agriculture in GDP. The map classifies agriculture in CDP is difficult to mea- 40+ percent countries by those shares. For exam- sure due to difficulties in assigning ple, countries whose shares of agricul- subsistence farming its appropriate Data not available ture in GDP range from 0 to 9 percent value. are colored dark green. The shares say 179 Table 1. Basic indicators GNP per capitaa Life Average annual expectancy Area Average annual growth rate rate of inflation0 at birth Population (thousands of square (percent) (percent) (years) (millions) Dollars mid-1984 kilometers) 1984 1965_84b 1965-73 1973_84c 1984 Low-income economies 2,389.5 31,795 260 iv 2.8 w 1.6 u' 5.9 iv 60 w China and India 1,778.3 12,849! 290 ii' 3.3 ii' 1.0 ii' 4.0w 63 iv Other low-income 611.2 I 18,946! 190w 0.9 w 4.6 ii' 14.9w 52 ii' Sub-Saharan Africa 257.7 I 15,646! 210w -0.1 iv 4.1 iv 20.1 w 48 ii' 1 Ethiopia 42.2 1,222 110 0.4 1.8 4.4 44 2 Bangladesh 98.1 144 130 0.6 7.3 9.9 50 3 Mali 7.3 1,240 140 1.1 7.6 10.4 46 4 Zaire 29.7 2,345 140 -1.6 18.7 48.2 51 5 BurkinaFaso 6.6 274 160 1.2 2.6 10.6 45 6 Nepal 16.1 141 160 0.2 5.8 8.1 47 7 Burma 36 1 677 180 2.3 2.8 6.0 58 8 Malawi 68 118 180 1.7 4.5 9.4 45 9 Niger 6.2 1,267 190 -1.3 4.0 11.5 43 10 Tanzania 21.5 945 210 0.6 3.2 11.5 52 11 Burundi 4.6 28 220 1.9 2.9 12.2 48 12 Uganda 15.0 236 230 2.9 5.6 64.5 51 13 Togo 2.9 57 250 0.5 31 8.2 51 14 Central African Rep. 2.5 623 260 -0.1 3.0 13.8 49 15 India 749.2 3,288 260 1.6 6.3 7.8 56 16 Madagascar 9.9 587 260 -1.6 4.1 14.4 52 17 Somalia 5.2 638 260 .. 3.8 20.2 46 18 Benin 3.9 113 270 1.0 3.6 10.8 49 19 Rwanda 58 26 280 2.3 7.7 10.5 47 20 China 1,029.2 9,561 310 4.5 -0.9 1.8 69 21 Kenya 19.6 583 310 2.1 2.3 10.8 54 22 Sierra Leone 3.7 72 310 0.6 1.9 15.4 38 23 Haiti 5.4 28 320 1.0 4.0 7.9 55 24 Guinea 5.9 246 330 1.1 3.0 4.5 38 25 Ghana 12.3 239 350 -1.9 81 52.2 53 26 Sri Lanka 15.9 66 360 2.9 5.1 14.9 70 27 Sudan 21.3 2,506 360 1.2 7.2 19.3 48 28 Pakistan 924 804 380 25 4.8 10.8 51 29 Senegal 6.4 196 380 -0.5 3.0 9.0 46 30 Afghanistan 648 . . . . 3.8 31 Bhutan 1.2 47 . . .. .. . . 44 32 Chad 4.9 1,284 .. .. .. .. 44 33 Kampuchea, Dem. .. 181 .. .. 34 Lao PDR 3.5 237 .. .. .. .. 45 35 Mozambique 13.4 802 .. .. .. .. 46 36 VietNam 60.1 330 .. . . .. .. 65 Middle-income economies 1,187.6! 40,927 1 1,250 w 3.1 iv 5.5 iv 38.0 ii' 61 iv Oil exporters 556.1 1 15,510! 1,000 iv 3.3 iv 4.9 iv 21.6 iv 58 iv Oil importers 631.5! 25,417! 1,460 w 3.1 iv 5.7 iv 44.5 w 64 iv Sub-Saha ran Africa 148.4! 6,228 I 680 w 2.4 iv 4.9 ii' 12.2 iv 50 iv Lowermiddle-income 691.1 1 19,132 740 iv 3.0 iv 5.6 iv 20.6 iv 58 iv 37 Mauritania 1.7 1,031 450 0.3 3.9 7.7 46 38 Liberia 2.1 111 470 0.5 1.5 6.7 50 39 Zambia 6.4 753 470 -1.3 5.8 10.4 52 40 Lesotho 1.5 30 530 59 4.4 11.9 54 41 Bolivia 6.2 1,099 540 02 7.5 545 53 42 Indonesia 158.9 1,919 540 4.9 63.0 17.4 55 43 YemenArab Rep. 7.8 195 550 5.9 .. 12.6 45 44 Yemen, PDR 20 333 550 .. .. ,. 47 45 Coted'lvoire 9.9 322 610 0.2 4.1 11.7 52 46 Philippines 53.4 300 660 2.6 8.8 12.9 63 47 Morocco 21.4 447 670 2.8 2.0 8.3 59 48 Honduras 4.2 112 700 0.5 2.9 8.6 61 49 ElSalvador 5.4 21 710 -0.6 1.6 11.3 65 50 PapuaNewGuinea 3.4 462 710 0.6 6.6 6.8 52 51 Egypt,ArabRep. 45.9 1,001 720 4.3 2.6 13.1 60 52 Nigeria 96.5 924 730 2.8 10.3 13.0 50 53 Zimbabwe 8.1 391 760 1.5 1.1 11.4 57 54 Cameroon 99 475 800 2.9 5.8 12.8 54 55 Nicaragua 3.2 130 860 -1.5 3.4 172 60 56 Thailand 50.0 514 860 4.2 2.5 8.2 64 57 Botswana 1.0 600 960 8.4 4.4 9.8 58 58 Dominican Rep. 6.1 49 970 3.2 27 9.0 64 59 Peru 18.2 1,285 1,000 -0.1 10.1 56.7 59 60 Mauritius 1.0 2 1,090 2.7 5.6 12.7 66 61 Congo, People's Rep. 1.8 342 1,140 3.7 4.6 12.3 57 62 Ecuador 9.1 284 1,150 3.8 6.2 17.8 65 63 Jamaica 2.2 11 1,150 -0.4 5.9 16.6 73 64 Guatemala 7.7 109 1,160 2.0 1.9 9.4 60 65 Turkey 48.4 781 1,160 2.9 10.5 424 64 Note: For comparability and coverage, see the technical notes. For U.N. and World Bank member countries with populations of less than 1 million, see Box A. 1. 180 GNP per capitaa Life Area Average annual Average annual expectancy (thousands growth rate rate of Inflationa at birth Population (millions) of square (percent) (percent) (years) Dollars mid-1984 kilometers) 1984 l96584L 1965-73 l973-84 1984 66 CostaRica 2.5 51 1,190 1.6 4.7 24.1 73 67 Paraguay 3.3 407 1,240 4.4 43 129 66 68 Tunisia 7.0 164 1,270 4.4 33 9.9 62 69 Colombia 28.4 1 139 1390 3.0 10.8 238 65 70 Jordan 3.4 98 1570 4.8 .. 9.6 64 71 SyrianArabRep. 10.1 185 1620 4.5 3.1 11.9 63 72 Angola 99 1247 . . 43 73 Cuba 9.9 115 .. ,, . . ,, 75 74 Korea, Oem. Rep. 19.9 121 .. . . . . . . 68 75 Lebanon . . 10 . . . . 2.5 . 76 Mongolia 1.9 1,565 . . .. . . 63 Upper middle-income 496.6 1 21,795 t 1,950w 3.3 w 5.6 w 44.0w 65 w 77 Chile 11.8 757 1700 -0.1 50.3 75.4 70 78 Brazil 132.6 8512 1,720 4.6 23.2 71.4 64 79 Portugal 10.2 92 1,970 3.5 4.9 20.5 74 80 Malaysia 15.3 330 1980 4.5 1.2 6.2 69 81 Panama 21 77 1,980 2.6 2.4 6.7 71 82 Uruguay 3.0 176 1,980 1.8 51.7 50.0 73 83 Mexico 76.8 1,973 2,040 29 48 31 5 66 84 Korea, Rep. of 40.1 98 2,110 6.6 15.5 17.6 68 85 Yugoslavia 23.0 256 2,120 4.3 109 24.6 69 86 Argentina 30 1 2.767 2,230 03 24.1 180.8 70 87 South Africa 31.6 1,221 2,340 1.4 60 13.2 54 88 Algeria 21.2 2.382 2,410 3.6 3.8 12.2 60 89 Venezuela 16.8 912 3,410 0.9 33 11.7 69 90 Greece 9.9 132 3,770 3.8 44 173 75 91 Israel 4.2 21 5,060 2.7 8.2 84.4 75 92 Hong Kong 5.4 1 6,330 6.2 6.4 9.8 76 93 Trinidadandlobago 1.2 5 7,150 2.6 5.7 15.6 69 94 Singapore 2.5 1 7,260 7.8 31 44 72 95 Iran, Islamic Rep. 43.8 1,648 . . ... , , , ... 61 96 Iraq 15.1 435 .. .. 3.2 . . 60 High-income oil exporters 18.6 4,311 I 11,250w 3.2 w 6.1 ii' 11.8 iv 62w 97 Oman 1.1 300 6,490 6.1 71 16.4 53 98 Libya 3.5 1,760 8,520 -1.1 9.4 10.8 59 99 SaudiArabia 11.1 2,150 10,530 5.9 5.1 14.1 62 100 Kuwait 1.7 18 16,720 -0.1 4.6 9.2 72 101 UnitedArabEmirates 1.3 84 21,920 .. . . 8.7 72 Industrial market economies 733.41 30,935 t 11,430w 2.4w 5.20 7.9w 76w 102 Spain 38.7 505 4,440 2.7 7.0 16.4 77 103 Ireland 3.5 70 4,970 24 8.5 14.4 73 104 Italy 570 301 6,420 2.7 51 17.2 77 105 New Zealand 3.2 269 7,730 1.4 7.2 13.6 74 106 United Kingdom 56.4 245 8,570 1.6 6.2 13.8 74 107 Belgium 9.9 31 8,610 3.0 4.4 64 75 108 Austria 7.6 84 9,140 36 4.5 5.3 73 109 Netherlands 14.4 41 9,520 2.1 6.4 5.9 77 110 France 54.9 547 9,760 3.0 5.3 10.7 77 111 Japan 120.0 372 10,630 4.7 60 4.5 77 112 Finland 4.9 337 10,770 3.3 72 10.7 75 113 Germany, Fed. Rep. 61.2 249 11,130 2.7 4.7 4.1 75 114 Denmark 5.1 43 11,170 1.8 7.6 9.4 75 115 Australia 15.5 7,687 11,740 1.7 5.7 10.4 76 116 Sweden 8.3 450 11,860 1.8 53 10.2 77 117 Canada 25.1 9,976 13,280 2.4 4.4 9.2 76 118 Norway 4,1 324 13,940 3.3 6.3 9.4 77 119 United States 237.0 9,363 15,390 1.7 4.7 74 76 120 Switzerland 6.4 41 16,330 1.4 5.5 3.9 77 East European nonmarket economies 389.3 23,421 . . . . . . 68 iv 121 Hungary 10.7 93 2,100 6.2 2.6 4.3 70 122 Poland 36.9 313 2,100 1.5 .. l9.4 71 123 Albania 2.9 29 .. .. .. .. 70 124 Bulgaria 9.0 111 . . . . . . . . 71 125 Czechoslovakia 15.5 128 . . . . .. . . 70 126 German Dam. Rep. 16.7 108 .. .. .. .. 71 127 Romania 22.7 238 . . . . .. . . 71 128 USSR 275.0 22,402 . , , .. 67 a. See the technical notes. b. Because data for the entire period are not always available, figures in italics are for perods other than that specified. c. Fig- ures in italics are for 1973-83 nOt 1973-84. 181 Table 2. Growth of production Average annual growth rate (percent) GDP Agriculture Industry (Manufacturing) Services 1965-7&' 1973-84" 1965-73" 197384' 1965-73" 1973-84" 1965-73 1973_84c l96573" 1973-84" Low-income economies 5.6 to 5.3 U' 3.0w 3.6 U' 8.9 w 7.4 U' 6.8 U 5.0 w China and India 6.2w 5.7 to 3.2w 3.9w 9.3 ti 7.7 w 7.8w 5.5 U' Other low-income 3.7 w 3.5 a' 2.5 w 2.4 U' 5.0 it' 4.3 U' 3.7 a' 3.5 w Sub-Saharan Africa 3.7 w 2.0 w 2.6w 1.4w 5.7 U' 1.8 U' 3.4 a' 1.4 U' 1 Ethiopia 41 2.3 21 1.2 6.1 2.6 8.8 35 6.7 3.6 2 Bangladesh 50 04 3.1 -6 1 76 1.5 7.1 3 Mali 3.1 41 0.9 5.0 5.1 0.6 4.7 45 4 Zaire 39 -10 1.4 -20 -50 -1.1 5 Burkina Faso 2.4 29 1.3 52 32 6 Nepal 1.7 31 7 Burma 2.9 6.0 2.8 6.6 3.6 77 32 6.1 28 51 8 Malawi 57 33 2.5 33 .. . . 4.0 9 Niger -08 5.2 -29 1.6 132 10.9 .. ., -1.5 5.9 10 Tanzania 5.0 2.6 31 69 87 . 6.2 11 Burundi 4.8 36 47 23 10.4 83 30 53 12 Uganda 3.6 -1.3 36 -0.7 3.0 -8.8 .. . 38 -0.4 13 Togo 53 2.3 26 11 62 26 .. 7.3 3.0 14 Central African Rep. 2.7 0.7 21 11 71 1.2 , , 1.6 (.) 15 India 3.9 4.1 37 23 3.7 4.4 40 5.9 4.2 6.1 16 Madagascar 3.5 (.) . . 0.3 . . -3.0 . . . . . 0.9 17 Somalia 18 Benin 22 46 27 79 51 19 Rwanda 6.3 54 . 20 China 7.8 66 2.8 4.9 12.1 8.7 , 11.7 5.0 21 Kenya 7.9 4.4 6.2 3.5 12.4 48 12.4 6.0 7.6 4.9 22 Sierra Leone 3.7 18 1.5 2.0 1.9 -2.5 3.3 18 71 3.7 23 Haiti 1.7 2.7 -0.3 0.5 4.8 45 30 54 25 37 24 Guinea 30 31 2.4 57 .. -2.0 . 2.3 25 Ghana 34 -09 45 02 43 -69 65 -69 1.1 0.4 26 Sri Lanka 4.2 5.2 2.7 4.1 7.3 4.8 5.5 3.6 3.8 6.0 27 Sudan 0.2 55 0.3 27 1.0 64 . . 10.1 0.5 7.5 28 Pakistan 5.4 5.6 47 3.0 6.6 7.6 6.2 75 5.4 6.4 29 Senegal 1.5 26 0.2 -0.2 3.5 60 . .. 1.5 2.3 30 Afghanistan 1.0 -15 40 . 51 31 Bhutan 32 Chad 0.5 33 Kampuchea, Dem. 34 Lao PDR 35 Mozambique 36 VietNam Middle-income economies 7.4 U' 4.4 to 3.6w 2.7 a' 9.1 U' 4.4 a' 9.2w 5.511' 7.8 a' 5.1 a' Oil exporters 7.8w 4.6 w 4.0 w 2.4 w 9.6 w 4.5 a' 8.8 w 7.0 a' 7.9 iv 5.3 iv Oil importers 7.1 to 4.3 w 3.2 w 2.9 w 8.4 a' 4.4 a' 9.4 a' 7.8 a' 7.8 to 5.0w Sub-Saharan Africa 8.5 a' 1.6w 3.0w 0.1 U' 16.8 a' 0.5 a' 6.4 a' 7.7 a' 3.4 to Lower middle-income 6.8 a' 4.2 a' 3.6w 2.4 a' 10.4 a' 4.2 a' 8.5 a' 5.9w 6.9w 5.1 w 37 Mauritania 2.6 2.3 -2 1 23 4.3 09 7.6 31 38 Liberia 5.5 0.2 6.5 20 6.2 -1.5 13.2 0.5 3.8 0.8 39 Zambia 2.4 0.4 2.0 1.0 2.7 -0.1 9.8 08 23 0.6 40 Lesotho 3.9 5.0 41 Bolivia 4.4 0.8 35 11 51 -1.7 4.2 02 43 1.9 42 Indonesia 8.1 68 48 37 13.4 8.3 90 14.9 9.6 8.6 43 Yemen Arab Rep. 81 1.8 .. 138 .. 14.2 . 9.6 44 Yemen, PDR 45 Cole dIvoire 71 3.7 37 33 88 66 8.9 50 8.5 29 46 Philippines 5.4 4.8 4.1 4.0 7.4 5.3 8.5 43 4.8 4.8 47 Morocco 5.7 4.5 4.8 0.6 54 3.7 6.1 5.8 6.1 5.8 48 Honduras 4.5 3.8 2.2 3.6 5.7 4.4 65 4.2 5.8 3.8 49 El Salvador 44 -03 3.6 0.4 52 -06 5.1 -1.5 4.4 -05 50 PapuaNewGuiriea 6.7 1.0 .. 26 .. 3.7 . .. -01 51 Egypt.ArabRep 3.8 8.5 2.6 2.5 3.8 10.3 . .. 4.7 10.6 52 Nigeria 9.7 0.7 2.8 -0.5 19.7 -1.0 15.0 8.5 8.8 3.2 53 Zimbabwe 9.4 1.7 . . 1.1 . . 0.4 , . 2.3 . . 3.0 54 Cameroon 4.2 7.1 4.7 1.6 4.7 15.0 7.5 13.5 3.6 7.1 55 Nicaragua 3.9 -1.1 2.8 1.4 5.5 -0.8 7.2 0.9 3.6 -2.4 56 Thailand 7.8 6.8 52 37 9.0 87 11.4 10.0 9.1 7.5 57 Botswana 14.8 10.7 6.4 -4.0 30.2 15.6 . 8.2 10.6 10.8 58 Dominican Rep. 8.5 3.3 5.9 0.7 144 3.7 12.0 3.9 6.9 4.0 59 Peru 3.5 1.5 2.0 1.2 4.1 1.1 4.4 -0.1 3.6 1.9 60 Mauritius 23 36 . -3 1 .. 44 . 4.3 65 61 Congo, Peoples Rep. 68 81 4.1 0.4 9.3 12.7 .. . 67 69 62 Ecuador 7.2 4.8 3.9 1.6 13.9 4.8 11.4 7.6 5.1 5.8 63 Jamaica 54 -1.4 0.6 0.2 45 -39 4.0 -3.3 68 -02 64 Guatemala 6.0 3.1 5.8 1.9 7.2 4.3 7.4 3.4 5.8 3.3 65 Turkey 6.5 41 2.5 3.3 7.9 4.2 9.5 40 84 43 Note: For data comparability and coverage, see the technical notes, 182 Average annual growth rate (percent) GOP Agriculture Industry (Manufacturing) Services 1 96573 1 973_84c 1 965_73b 1 973_84c 1 965..73b 1 973_54c 1965-73 1 973_84c 1 965_73b 1 973_84c 66 Costa Rica 7.1 2.8 7.0 1.9 93 33 . 61 29 67 Paraguay 5.1 7.5 2.7 5.7 68 9.5 61 67 6.0 7.7 68 Tunisia 6.9 5.5 6.6 1.9 8.6 6.8 10.4 10.2 6.0 5.9 69 Colombia 6.4 3.7 4.0 35 82 25 8.8 20 69 44 70 Jordan 9.6 . . 5.4 , 13.6 , , 12.9 . 8.5 71 Syrian Arab Rep. 6.2 7.0 -0.7 6.8 14.9 4.5 . . . . 5.7 8.3 72 Angola 73 Cuba 74 Korea, Dem. Rep. 75 Lebanon 6.2 . . 1.4 55 . , 7.1 76 Mongolia Upper middle-income 7.7 w 4.5w 3.5w 3.0 iv 8.6 iv 4.6 iv 9.5 iv 5.3 ii' 8.2 a' 5.1 ii' 77 Chile 3.4 2.7 -1.1 34 30 1.9 4.1 0.7 4.4 3.2 78 Brazil 98 4.4 38 40 110 42 11.2 4.9 10.5 4.6 79 Portugal 7.0 80 Malaysia 67 7.3 4.2 8.7 87 8.1 81 Panama 7.4 5.0 3.4 2.1 9.3 30 8.0 2.1 7.8 6.1 82 Uruguay 1.2 2.0 0.4 1.5 14 1.5 . . .. 1.3 2.3 83 Mexico 7.9 5.1 54 3.4 8.6 55 99 5.0 8.0 5.2 84 Korea, Rep. of 10.0 7.2 2.9 1.7 18.4 10.9 21.1 11.5 11.3 6.8 85 Yugoslavia 61 4.2 3.2 2.0 7.1 4.7 . . . . 64 47 86 Argentina 43 0.4 -0 1 1.6 51 -07 4.6 -0.2 5.5 09 87 South Africa 5.1 2.7 88 Algeria 7.0 64 2.4 4.2 9.1 6.3 10.9 17.8 5.3 7.0 89 Venezuela 5.1 19 4.5 24 4.1 1.1 57 34 60 23 90 Greece 7.5 2.7 2.5 1.2 11.1 1.9 12.0 2.3 7.3 3,7 91 Israel 9.6 3.1 92 Hong Kong 7.9 9.1 -0.6 0.8 8.4 8.0 8.1 9.6 93 Trinidad and Tobago 3.5 52 1.6 .. 2.3 4.5 94 Singapore 13.0 8.2 5.7 1.4 17.6 86 19.5 76 11.5 81 95 Iran, Islamic Rep. 10.4 .. 5.2 .. 10.5 137 12.7 96 Iraq 4.4 .. 17 .. 4.8 8.9 5.1 High-income oil exporters 9.0w 4.5w .. 6.8w .. -0.2 a' .. 7.6w .. 10.8 iv 97 Oman 219 6.1 98 Libya 7.7 3.0 115 6.5 6.6 -4.3 124 114 13.4 14.7 99 Saudi Arabia 11.2 6.0 2.6 69 13.3 2.4 10.6 82 8.3 12.5 100 Kuwait 5.1 1.5 102 -4.5 8.1 101 United Arab Emirates 5.3 Industrial market economies 4.7w 2.4 iv 1.8w 1.1 w 5.1 iv 1.8w 5.3 iv 2.1 iv 4.8w 2.1 w 102 Spain 6.4 1.6 2.8 .. 86 .. 98 .. 5.6 103 Ireland 5.0 3.9 .. .. .. .. 104 Italy 5.2 21 05 17 6.2 1.8 .. .. 52 2.5 105 New Zealand 3.7 1.4 .. .. .. .. .. 106 United Kingdom 28 1.0 2.6 2.7 21 -03 2.6 -1 7 33 17 107 Belgium 52 1.7 2.2 2.1 64 1.0 74 1.3 4,4 2.2 108 Austria 5.5 2.5 1.7 0.5 6.4 2.1 69 2.5 5.2 3,3 109 Netherlands 5.5 1.6 5.0 4.8 6.5 (.) 5.0 2.2 110 France 55 2.3 1.7 1 .6 6.7 1.4 7.7 17 5.2 29 111 Japan 9.8 4.3 2.1 -1.3 13.5 5.9 14.4 7.2 83 3.3 112 Finland 5.3 2.9 1.0 1.1 6.4 3.0 7.5 3,7 5.6 3.2 113 Germany, Fed. Rep. 4.6 2.0 2.5 2.1 4.9 1.7 5.3 1.9 44 2.3 114 Denmark 3.9 17 -1.5 3.7 4.0 0.8 4.7 2.4 4.3 1.9 115 Australia 5.6 2.4 16 2.4 5.7 1.4 4,9 1.0 5.4 3.5 116 Sweden 3.6 1.4 1.1 -0.1 3.9 0.2 4.1 -0.1 36 2.1 117 Canada 5.2 2.5 1.2 18 5.2 10 54 1.1 5.5 3.2 118 Norway 4.0 3.7 -05 10 48 42 4.6 (.) 4.0 37 119 United States 3.2 2.3 1.8 1.4 2.8 1.2 2.9 1.4 3,5 3.0 120 Switzerland 4.2 0.8 East European nonmarket economies 121 Hungaryd 6.1 3.5 3.1 3.5 6.5 4.1 .. 7.5 2.8 122 Poland .. .. .. .. .. ., . . .. 123 Albania .. .. .. .. .. .. ,. . 124 Bulgaria . . . . .. . . . . .. , , . . . 125 Czechoslovakia .. .. .. .. .. .. .. .. 126 German Bern. Rep 127 Romania 128 USSR a. Because manufacturing is the most dynamic part of the industrial sector, its growth rate is shown separately. b. Figures in italics are for 1966-73, not 1965-73. c. Figures in italics are for 1973-83, not 1973-84. d. Services include the unallocated share of GDP 183 Table 3. Structure of production GDP" Distribution of gross domestic product (percent) (millions of dollars) Agriculture Industry (Manufacturing)" Services 1965" 1984" 1965" 1984" 1965" 1984" 1965 1984" 1965" 1984" Low-income economies 42 w 36 w 28 w 35 w 14w 15w 30w 29w China and India 42 a' 36 w 31w 38 w iSa' 15w 27 u' 26 w Other low-income 43 a' 36 w 16w 20 w 11 U' 15w 41 w 44 w Sub-Saharan Africa 43 w 39 w 16w 18w 9 U' 10 U 41 a 43w 1 Ethiopia 1,180 4,270 58 48 14 16 7 11 28 36 2 Bangladesh 4,380 12,320 53 48 11 12 .. 36 39 3 Mali 980 49 46 13 11 .. 38 43 4 Zaire 1,640 4,700 22 27 .. 17 51 5 Burkina Faso 250 820 52 43 15 20 32 38 6 Nepal 730 2290 65 56 11 12 3 4 23 32 7 Burma 1,600 6,130 35 48 13 13 9 9 52 39 8 Malawi 220 1090 50 37 13 18 37 45 9 Niger 370 1,340 63 33 9 31 . . . 28 37 10 Tanzania 790 4,410 46 . . 14 . 8 40 11 Burundi 160 1020 58 . 16 . . . 26 12 Uganda 1180 4,710 52 . 13 . . 8 . . 35 13 Togo 190 720 45 22 21 28 10 6 34 50 14 Central African Rep. 140 560 46 39 16 20 4 8 38 40 15 India 46260 162,280 47 35 22 27 15 15 31 38 16 Madagascar 730 2,380 31 42 16 16 .. .. 53 42 17 Somalia 220 1.364 71 . . 6 . 3 . . 24 18 Benin 210 900 53 43 9 14 .. .. 38 43 19 Rwanda 150 1,600 75 . 7 2 18 20 China 65,590 281,250 39 36 38 44 23 20 21 Kenya 920 5,140 35 31 18 21 11 12 47 48 22 Sierra Leone 320 900 34 35 28 25 6 6 38 40 23 Haiti 350 1,820 .. .. .. ,. .. 24 Guinea 520 2,100 41 .. 21 . . 2 .. 38 25 Ghana 1,330 4,485 41 52 19 9 10 5 41 40 26 SriLanka 1,770 5,430 28 28 21 26 17 14 51 46 27 Sudan 1,330 6,730 54 33 9 16 4 . . 37 51 28 Pakistan 5,450 27,730 40 24 20 29 14 20 40 47 29 Senegal 810 2,390 25 17 18 28 18 56 55 30 Afghanistan 620 . . . . . 31 Bhutan 32 Chad 240 47 12 . . . . . . 41 33 Kampuchea, Dem. 34 Lao POR 35 Mozambique 36 VietNam Middle-income economies 21 a' 14w 31w 37 a 20 a' 22 a' 48 a' 49 a' Oil exporters 22 w 15w 28 w 39 a' 16w 18 a 50 w 46 a' Oil importers 21 a 13 w 33 u' 35 w 22 w 25 a' 46 w 52 w Sub-Saharan Africa 38 w 25w 25 a 31w 9w 7 a' 37 U 44 a' Lower middle-income 31 a' 22 a' 25 a' 33 a' 15 w 17 w 44 a' 45 a' 37 Mauritania 160 660 32 30 36 27 4 . 32 42 38 Liberia 270 980 27 36 40 26 3 7 34 38 39 Zambia 1,060 2,640 14 15 54 39 6 21 32 46 40 Lesotho 50 360 65 . . 5 . . 1 . . 30 41 Bolivia 920 3,610 21 25 30 33 16 20 49 40 42 Indonesia 3,630 80,590 59 26 12 40 8 . 29 34 43 Yemen Arab Rep. . . 2,940 .. 24 21 .. 9 .. 56 44 Yemen, PDR .. .. . 45 Coted'lvoire 960 6690 36 28 17 26 10 17 47 46 46 Philippines 6,010 32,840 26 25 28 34 20 25 46 41 47 Morocco 2,950 13,300 23 17 28 32 16 17 49 51 48 Honduras 460 2840 40 27 19 26 12 15 41 47 49 El Salvador 800 4,070 29 21 22 21 18 16 49 58 50 PapuaNtewGuinea 340 2360 42 34 18 9 . . . 41 58 51 Egypt, Arab Rep. 4,550 30,060 29 20 27 33 . . .. 45 48 52 Nigeria 4,190 73,450 53 27 19 30 7 4 29 43 53 Zimbabwe 960 4,580 18 14 35 40 20 27 47 46 54 Cameroon 750 7,800 32 22 17 35 10 11 50 43 55 Nicaragua 710 2,830 25 24 24 30 18 25 51 45 56 Thailand 4,050 41,960 35 20 23 28 14 .. 42 52 57 Botswana 50 990 34 6 19 45 12 7 47 48 58 Dominican Rep. 960 4,910 26 15 20 31 14 19 53 53 59 Peru 4,900 18,790 15 8 30 40 20 25 55 51 60 Mauritius 190 860 16 14 23 25 14 17 61 61 61 Congo, People'sRep 200 2,010 19 7 19 60 . . 6 62 33 62 Ecuador 1,150 9,870 27 14 22 41 18 19 50 46 63 Jamaica 870 2,380 10 6 37 39 17 18 53 56 64 Guatemala 1,330 9,400 .. . . . . . . . . . 65 Turkey 7,660 47,460 34 19 25 33 16 24 41 47 Note: For data comparability and coverage, see the technical notes 184 GDPa Distribution of gross domestic product (percent) (millions of dollars) Agriculture Industry (Manufacturing)b Services 1965C 1984d 1965C 1984d 1965C 1964d 1965 1984d 1965C l984d 66 Costa Rica 590 3,560 24 21 23 30 53 49 67 Paraguay 550 3,870 37 26 19 26 16 17 45 48 68 Tunisia 880 6,940 22 15 24 35 9 14 54 50 69 Colombia 5,570 34,400 30 20 25 30 18 18 46 50 70 Jordan 3,430 8 30 15 62 71 SyrianArabRep. 1,470 15,930 29 20 22 24 .. .. 49 57 72 Angola 73 Cuba 74 Korea, Oem. Rep. 75 Lebanon 1,150 .. . 12 .. 21 67 76 Mongolia .. Upper middle-income 17w lOw 35w 39w 22w 25w 48w 51w 77 Chile 5,940 19,760 9 6 40 39 24 21 52 56 78 Brazil 19,260 187,130 19 13 33 35 26 27 48 52 79 Portugal 3,740 19,060 . . 9 . . 40 . . . 50 80 Malaysia 3,000 29,280 30 21 24 35 10 19 45 44 81 Panama 660 4,540 18 9 19 19 12 9 63 72 82 Uruguay 930 4,580 15 14 32 29 53 57 83 Mexico 20,160 171,300 14 9 31 40 21 24 54 52 84 Korea, Rep. ot 3,000 83,220 38 14 25 40 18 28 37 47 85 Yugoslavia 11,190 38,990 23 15 42 46 .. . . 35 40 86 Argentina 14,330 76,210 17 12 42 39 33 30 42 50 87 South Africa 10,540 73,390 10 5 42 47 23 23 48 48 88 Algeria 3,170 50,690 15 6 34 53 11 . 51 41 89 Venezuela 8,290 47,500 7 7 23 43 .. 18 71 50 90 Greece 5,270 29,550 24 18 26 29 16 18 49 53 91 Israel 3,590 22,350 8 5 37 27 .. .. 55 68 92 Hong Kong 2,150 30,620 2 1 40 22 24 .. 58 78 93 TrinidadandTobago 660 8,620 5 . . 38 .. 19 . . 57 94 Singapore 970 18,220 3 1 24 39 15 25 73 60 95 Iran, Islamic Rep. 6,170 157,630 26 . . 36 .. 12 .. 38 96 Iraq 2,430 18 . 46 . 8 36 High-income oil exporters 5w 2w 65 w 61 w 5w 7w 30 w 37 a 97 Oman 60 7,680 61 23 .. 16 98 Libya 1,500 30,570 5 2 63 64 3 4 33 34 99 SaudiArabia 2,300 109,380 8 3 60 60 9 7 31 38 100 Kuwait 2,100 21,710 0 1 73 58 3 8 27 41 101 UnitedArabEmirates . . 28,840 .. 1 .. 67 9 . 32 Industrial market economies 5w 3w 39 w 35 w 29 w 25 w 56 w 62 w 102 Spain 23,320 160,930 15 36 . . 25 .. 49 103 Ireland 2,690 18,270 . 11 . . 25 .. 14 64 104 Italy 62,600 348,380 11 5 41 40 .. . 48 55 105 New Zealand 5,580 23,340 . 9 . . 32 .. 23 . . 60 106 United Kingdom 99,530 425,370 3 2 41 36 30 22 56 62 107 Belgium 16,840 77,630 5 3 41 34 30 24 53 64 108 Austria 9,470 64,460 9 4 46 38 33 27 45 58 109 Netherlands 19,700 132,600 . . 4 . . 32 . . 24 . . 64 110 France 97,930 489,380 . . 4 . . 34 . . 25 .. 62 111 Japan 90,970 1,255,006 9 3 43 41 32 30 48 56 112 Finland 8,190 51,230 15 7 33 34 21 24 52 59 113 Germany, Fed. Rep. 114,830 613,160 .. 2 .. 46 . 36 .. 52 114 Denmark 10,180 54,640 8 5 32 25 20 17 60 70 115 Australia 23,260 182,170 10 .. 41 . . 28 .. 50 116 Sweden 21,670 91,880 6 3 40 31 28 22 53 66 117 Canada 51,840 334,110 5 3 34 24 23 .. 61 72 118 Norway 7,080 54,720 8 4 33 43 21 14 59 54 119 United States 688,600 3,634,600 3 2 38 32 29 21 59 66 120 Switzerland 13,920 91,110 . . . .. .. . . . . . East European nonmarket economies 121 Hungarye .. 20,150 24 20 37 42 .. .. 39 38 122 Poland .. 75,410 . is .. 52 .. .. . , 33 123 Albania . . . . .. . . .. .. ,, .. 124 Bulgaria . . . . . . . . . . . . . . . . . 125 Czechoslovakia .. .. .. .. . . . . .. .. . . 126 German Oem. Rep 127 Roman/a 128 USSR a. See the technical notes, b. Because manufacturing is the most dynamic part of the industrial sector, its share of GDP is shown separately c. Figures in italics are for 1966 not 1965. d. Figures in italics are for 1983, not 1984. e. Based on constant price series: services include the unallocated share of GDP. 185 Table 4. Growth of consumption and investment Average annual growth rate (percent) General government Private Gross consumption consumption domestic investment 1965-73 1973-84° 1965-73 1973-84° 1965-73 1973840 Low-Income economies 6.5 w 6.7w 4.3 w 5.1 w 8.0 w 6.5 w China and India 6.9w 7.0w 4.8 w 5.3 w 9.1 w 6.8 iv Other low-income 4.8 w 4.3 ii' 3.0 w 4.2 w 3.2 w 4.1 iv Sub-Saharan Africa 4.6 iv 3.5 w 2.6 w 2.8 w 6.3 w 0.8 iv 1 Ethiopia 3.7 7.1 4.2 2.6 1.5 2.6 2 Bangladesh b b 0.9 51 -6.4 4.7 3 Mali 2.3 5.8 3.4 31 1.0 4.2 4 Zaire 5.8 . 2.2 10.2 5 Burkina Faso 10.7 3.0 0.4 4.1 13.7 -3.3 6 Nepal ,. .. 7 Burma b b 2.9 5.4 2.5 14.1 8 Malawi 3.0 6.7 4.1 3.0 16.0 -2.6 9 Niger 2.1 2.3 -3.3 6.6 4.6 3.5 10 Tanzania b . . 50 9.6 11 Burundi 12.3 54 47 2.8 -1.4 15.7 12 Uganda b . 3,8 .. 21 13 Togo 79 84 6.0 3.3 33 -02 14 Central Atrican Rep 17 -2.0 3.6 2.6 23 -47 15 India 68 8.8 3.2 4.1 39 42 16 Madagascar 3.3 3.3 4.0 -0.5 4.2 -1.8 17 Somalia 16.9 ,. 0.7 .. 5.6 18 Benin 3.6 3.7 1.1 3.1 3.9 10.3 19 Rwanda 2.8 . 7.7 . . 6.3 20 China 7.0 6.4 6.3 6.3 12.9 8.0 21 Kenya 13.1 5.2 5.1 2.9 159 1.2 22 Sierra Leone 5.3 .. 3.8 . . -1.4 23 Haiti 3.1 5.1 0.8 2.4 14.4 7.6 24 Guinea .. 5.0 .. 2.5 . -1.5 25 Ghana 1.1 5.4 23 -1.3 -3.5 -5.4 26 Sri Lanka 2.3 1.7 3.5 4.7 7.9 138 27 Sudan 14 3.3 -1.7 6.8 0.2 3.2 28 Pakistan 6.2 60 5.9 5.9 04 5.4 29 Senegal -1.2 6.2 0.1 3.1 81 -0.7 30 Afghanistan b 1.1 . . -2.2 31 Bhutan 32 Chad 6.0 0.7 .. 45 33 Kampuchea, Dem 34 Lao PDR 35 Mozambique 36 V,et Nam Middle-income economies 8.2 iv 4.8 U' 7.1 U' 4.5 iv 8.9 iv 3.0 iv Oil exporters 10.7 iv 6.2 iv 6.9 U' 5.6 iv 9.5 U' 4.1 iv Oil importers 6.7w 3.9 iv 7.2 iv 3.9 w 8.5 w 2.3w Sub-Saharan Africa 13.4w 4.1 iv 6.1 iv 3.7 iv 12.2 U' -1.2 U Lower middle-income 8.7iv 6.0w 5.9w 4.7iv 8.3 iv 3.5 iv 37 Mauritania 61 -0.6 27 3.3 12.5 4.8 38 Liberia 4.5 4.1 0.3 -0.1 5.6 1.5 39 Zambia 10.4 -1.0 -1.2 0.9 6.2 -13.7 40 Lesotho 54 .. 59 . . 11 0 41 Bolivia 84 1.5 3.1 2.0 6.9 -12.2 42 Indonesia 9.8 10.3 7.1 9.1 17.5 11.3 43 YemenArab Rep. . . 17.9 .. 5.7 . . 12.3 44 Yemen, PDR .. .. .. 45 CotedIvoire 15.2 8.1 5.1 3.3 102 2.9 46 Philippines 8.4 30 4.0 43 44 4.3 47 Morocco 5,5 9,9 5.1 3.7 11.0 1.6 48 Honduras 7.0 5.6 3.8 3.4 43 2.4 49 El Salvador 7.6 3.5 3.9 -0.9 3.4 -4.4 50 PapuaNewGuinea 2.4 -2.2 5.2 3.1 10.9 4.2 51 Egypt, Arab Rep. b b 5.3 8.4 -1 5 10.3 52 Nigeria 16.1 38 7.3 3.5 15.2 -2.0 53 Zimbabwe 83 7.2 76 54 Cameroon 46 65 3.4 66 86 10.6 55 Nicaragua 3.2 13.8 27 -4.8 22 -10 56 Thailand 9.8 8.8 69 6.0 7.6 5.3 57 Botswana 5.5 12.8 7.4 86 48.1 1.4 58 Dominican Rep. -3.6 6.8 8.6 35 19.2 2.0 59 Peru 5.4 2.4 5.6 1.6 -2.6 -27 60 Mauritius 2.3 5.7 -07 4,7 5.2 -3.7 61 Congo, People's Rep. 7.4 5.3 3.9 62 9.3 6.3 62 Ecuador 7.0 7.5 5.2 58 6.0 3.1 63 Jamaica 13.6 2.4 45 -2.6 7.5 -5.8 64 Guatemala 5.7 6.1 5.4 3.2 5.3 -0.1 65 Turkey 5.7 5.5 6.0 2.6 97 2.3 Note; For data comparability and coverage, see the technical notes. 186 Average annual growth rate (percent) General government Private Gross consumption consumption domestic investment 1965-73 1973-84 1965-73 1 973_84a 1965-73 1973_84a 66 Costa Rica 6.8 2.9 5.1 1.9 9.3 0.7 67 Paraguay 6.2 8.9 5.0 7.3 8.3 103 68 Tunisia 5.9 7.1 7.2 7.0 1.5 6.0 69 Colombia 8.8 6.0 6.5 4.5 6.7 5.5 70 Jordan 71 Syrian Arab Rep. 12.5 100 6.5 8.4 7.2 10.0 72 Angola .. 73 Cuba .. . 74 Korea, Dem. Rep. .. .. .. 75 Lebanon 3.7 .. 5.4 .. 5.1 76 Mongolia .. .. .. Upper middle-income 8.0w 4.2 w 7.7 w 4.4 w 9.1 w 2.8 w 77 Chile 6.3 0.4 4.8 2.3 (.) 1.0 78 Brazil 7.3 3.1 10.2 4.9 11.3 (.) 79 Portugal 7.1 6.2 8.4 1.5 8.0 2.4 80 Malaysia 6.9 100 4.6 6.9 9.1 11.4 81 Panama 9.7 5.1 5.2 48 15.4 -0.4 82 Uruguay 1.9 3.0 4.1 0.6 4.0 39 83 Mexico 8.7 6.8 7.7 47 8.4 3.3 84 Korea, Rep. of 7.3 5.4 8.7 5.9 19.7 8.8 85 Yugoslavia 2.2 2.8 9.7 3.3 4.8 3.9 86 Argentina 2.4 b 4.3 0.7 6.7 -3.4 87 South Africa 5.5 .. 5.5 .. 6.4 88 Algeria 5.8 10.1 6.4 9.2 17.4 6.8 89 Venezuela 6.8 4.5 55 5.6 9.0 -0.8 90 Greece 5.7 5.2 6.9 3.1 11.1 -1.4 91 Israel 15.8 -1.0 6.9 5.0 133 -1.5 92 Hong Kong 6.9 9.2 9.5 9.9 3.7 9.7 93 Trinidad and Tobago b 4.9 .. 24 94 Singapore 163 65 9.9 6.2 22.7 9.5 95 Iran, Islamic Rep. 17.3 . 7.9 , . 11.2 96 Iraq b .. 3.3 . . 7.2 High-income oil exporters 8.7 ii' .. 4.3 iv 97 Oman 98 Libya 19.8 7.3 22.1 9.0 27 3,7 99 Saudi Arabia b b 8.8 21.2 9.4 27.1 100 Kuwait b 4.3 0.8 101 United Arab Emirates Industrial market economies 3.2 iv 2.5 iv 4.9 ii' 2.6 iv 5.4 iv 0.9 ii' 102 Spain 4.0 4.2 6.1 1.3 6.7 -23 103 Ireland 64 3.8 4.8 1.1 8.5 1.8 104 Italy 4.1 2.5 5.7 2.2 5.9 -05 105 New Zealand 2.9 16 3.2 1.1 2.6 -1.8 106 United Kingdom 2.1 1.4 2.9 1.4 31 -10 107 Belgium 4.9 2.7 5.0 2.1 4.1 -2.6 108 Austria 38 2.9 4,7 2.6 6.9 0.7 109 Netherlands 32 2.3 5.1 1.8 5,9 -20 110 France 3.9 2.7 53 3.0 69 04 111 Japan 5.3 3.9 8.4 3.3 14.1 3.0 112 Finland 5.5 4.4 4.8 2.4 4,9 -0.2 113 Germany, Fed, Rep. 4.0 2.2 4.9 1.8 44 1.3 114 Denmark 6.0 3.6 2.9 08 4.9 -2.4 115 Australia 4.8 4.3 4.9 3.0 3.7 07 116 Sweden 4.9 2.8 2.9 0.9 2.1 -1.5 117 Canada 6.2 1.4 5,3 2.6 3.8 0.1 118 Norway 5.6 3.7 3.7 4,5 45 -2 1 119 United States 18 25 4.0 3.0 2.7 1.5 120 Switzerland 3.9 1.6 4.5 1.1 5.3 1.2 East European nonmarket economies 121 Hungary 3.3 3.0 2.0 122 Poland 123 Albania 124 Bulgana 125 Czechoslovakia 126 German Oem. Rep. 127 Romania 128 USSR a. Figures in italics are for 1973-83, not 1973-84. b. General government consumption figures are not available separately; they are included in private consumption. 187 Table 5. Structure of demand Distribution of gross domestic product (percent) General Exports of goods government Private Gross domestic Gross domestic and nonfactor Resource consumption consumption investment savings services balance 1965 1984e 1965 1984 1965 1984 1965 1984e 1965 1984 1965 1984 Low-income economies 13w 13w 68 w 64 ii' 21 w 25 w 19w 23 iv 7 iv 9w ---2w 2w China and India 13 iv 14 a' 66 w 60 w 22 w 28 w 21 iv 26 iv 4 iv 8 iv --1 iv Other low-income 12 iv 1211' 77 w 81 ii' 15w 16w 12 iv 7 iv 19w 14w 3w ---9a' 7 a' 1 Sub-Saharan Africa Ethiopia 2 Bangladesh 14w 11 14w 17 73 w 77 83 82 ii' 81 87 15w 13 13w 11 16 13 iv 12 6 iv 2 4 25 w 12 10 16w 12 8 1 9 ----2 iv 4 12 3 Mali 4 Zaire 9 17 27 9 72 44 75 11 23 17 11 38 8 2 13 23 11 10 19 18 28 13 70 8 28 5 BurkinaFaso 6 Nepal 7 Burma 7 b b 15 14 b 91 100 87 98 90 69 10 6 19 14 19 22 () 13 2 10 17 9 8 14 18 11 8 69 6 5 8 Malawi 16 16 84 67 14 16 ).) 17 19 27 14 () 9 Niger 8 10 84 79 15 25 9 11 12 22 -7 -14 10 Tanzania 10 74 15 - - 16 - - 26 1 - - 11 Burundi 14 89 79 21 4 7 10 9 -2 -14 12 Uganda 13 Togo 10 8 7 b 17 78 76 94 79 11 22 6 8 23 12 17 6 4 19 20 11 31 3 6 19 1 4 Central African Rep 22 13 67 91 21 12 11 4 27 25 11 16 2 15 India 16 Madagascar 17 Somalia 10 23 11 14 74 74 84 67 78 18 10 24 14 16 4 22 9 16 4 6 16 6 3 5 -3 18 Benin 19 Rwanda 14 14 8 10 83 81 93 -- 11 12 10 7 8 3 5 -3 -- 17 14 12 18 -- 9 10 5 - 20 China 15 15 59 55 25 30 25 30 4 10 () 2 1 21 Kenya 22 Sierra Leone 23 Haiti 15 8 8 19 12 7 70 83 90 61 86 84 14 12 7 22 9 16 15 9 2 20 6 4 31 30 13 26 17 24 312 5 2 1 24 Guinea 14 73 10 13 25 3 25 Ghana 14 6 77 89 18 6 8 5 17 11 10 1 26 Sri Lanka 74 73 26 38 27 Sudan 28 Pakistan 13 12 12 7 79 76 91 82 12 10 11 17 13 9 20 36 15 29 10 1 8 13 12 1 29 Senegal 30 Afghanistan 11 17 12 19 75 99 76 21 12 15 13 8 5 24 8 11 29 4 10 11 b - - 11 1 11 - 31 Bhutan -- -- 32 Chad 33 Kampuchea. Oem - 14 16 84 71 - - - 9 13 - - - 12 2 -- - - - 23 12 - - 7 1 -- -- - - - - 34 LaoPDR -- -- -- -- - -- -- -- -- -- 35 Mozambique - - - - - - - - - - 36 Viet Nam - - - - - - - - - - - - - - - Middle-income economies 11 iv 13 iv 68 iv 67 iv 21 iv 21 iv 21 a' 22 iv 18w 25 iv (.) iv 1 iv Oil exporters 11 iv 13w 68 w 62 iv 19 iv 22 w 21 iv 25 w 19 iv 24 iv 2w 3iv Oil importers 11w 14w 67 iv 70 iv 22 iv 21 w 21 iv 21 w 18w 25 iv 1 iv (.) ii' Sub-Saharan Africa 10 iv 14 iv 70 iv 68 iv 19 iv 14 ii' 20 ii' 18 ii' 27 iv 22 a' 1 iv 4w Lower middle-income 11 iv 13 iv 73 w 71 iv 17 iv 19 iv 16 iv 16 w 17 w 21 iv 1 iv 3 iv 37 Mauritania 19 17 54 84 22 27 1 42 48 13 23 38 Liberia 39 Zambia 12 15 23 23 61 45 62 62 14 17 25 20 14 27 40 14 15 50 49 40 37 10 15 5 1 40 Lesotho 18 . 109 - - 11 - - 26 16 - 38 - 41 Bolivia 10 11 80 63 16 18 11 26 17 17 5 8 42 Indonesia 6 10 88 70 7 21 6 20 5 23 () 1 43 Yemen Arab Rep - - 40 - 83 - - 21 - - 22 7 43 44 Yemen. PDR - - - - - - - - - - - - - - - 45 Cole dIvoire 11 16 69 56 19 13 20 28 35 46 1 15 46 Philippines 9 6 70 76 21 18 21 18 17 21 () 47 Morocco 18 76 70 10 23 12 12 18 25 -11 48 Honduras 49 El Salvador 12 10 9 15 14 75 79 71 82 15 15 19 12 15 12 14 4 27 27 27 21 2 8 ))5 1 50 PapuaNewGuinea 34 24 64 60 22 31 2 16 18 42 20 14 13 51 Egypt. Arab Rep 19 23 67 65 18 25 14 12 18 28 _4 52 Nigeria 7 14 76 71 19 12 17 15 18 16 2 2 53 Zimbabwe 54 Cameroon 12 14 19 65 73 72 58 15 13 23 13 9 25 22 32 1 8 3 10 13 26 33 7 55 Nicaragua 8 35 74 55 21 18 18 10 29 18 3 7 56 Thailand 10 13 71 66 20 23 19 21 18 24 1 2 57 Botswana 58 Dominican Rep. 59 Peru 24 18 12 26 12 8 89 75 69 54 76 70 21 6 9 21 21 14 13 19 7 20 17 18 32 15 16 61 27 20 2 19 1 5 4 60 Mauritius 13 13 74 69 17 18 13 18 36 48 4 (.) 61 Congo. Peoples Rep. 14 13 80 48 22 35 5 39 36 64 17 4 62 Ecuador 9 12 80 66 14 20 11 22 16 27 3 4 4 2 63 Jamaica 64 Guatemala 65 Turkey 12 8 7 17 8 10 69 82 74 65 84 79 27 13 15 22 11 20 23 10 13 lB 11 9 33 17 6 55 13 12 3 2 1 9 No(e For data comparability and coverage see the technical notes 188 Distribution of gross domestic product (percent) General Exports of goods government Private Gross domestic Gross domestic and nonfactor Resource consumption consumption investment savings services balance 1965 1984° 1965 1984° 1965 1984° 1965 1984° 1965 1984° 1965 1984° 66 CostaRica 67 Paraguay 68 Tunisia 13 7 15 16 8 17 78 79 71 61 83 63 20 15 28 25 17 32 9 14 14 24 9 20 23 15 19 34 21 34 19 10 13 12 69 Colombia 70 Jordan . 8 11 24 75 73 92 16 19 32 17 . . 16 16 11 12 43 . 2 1 48 71 Syrian Arab Rep. 14 23 76 65 10 24 10 12 17 13 ).) -11 72 Angola .. .. . 73 Cuba .. .. .. .. .. . 74 Korea, Oem, Rep. . . 13 . . . 75 Lebanon 10 . 81 .. 22 . 9 .. 36 . . 76 Mongolia . . . . . . Upper middle-income 11 w 14 w 65 w 65 u' 23 to 22 w 24 w 26 to 18 to 26 to 1 to 4w 77 Chile 11 14 73 73 15 14 16 13 14 23 1 1 78 Brazil 79 Portugal 11 12 b 14 62 68 79 70 25 25 16 23 27 20 21 16 8 27 14 39 57 2 6 80 Malaysia 81 Panama 15 11 18 19 63 73 50 64 18 18 31 18 23 16 32 17 44 36 56 36 21 4 1 82 Uruguay 15 12 68 75 11 9 18 13 19 25 7 5 83 Mexico 7 10 72 61 22 22 21 30 9 18 8 84 Korea, Rep of 9 10 83 60 15 29 8 30 9 37 7 (.) 85 Yugoslavia 18 16 52 54 30 29 30 30 22 31 (.) 1 86 Argentina 8 b 69 81 19 14 22 19 8 13 3 4 87 South Africa 11 16 62 55 25 27 29 26 26 4 88 Algeria 89 Venezuela 15 12 16 13 66 54 45 58 28 22 24 38 16 19 34 39 29 22 31 26 32 3(.) 10 13 1 90 Greece 91 Israel 12 19 73 70 26 21 15 11 9 19 11 10 13 11 20 33 65 59 29 19 15 8 19 40 92 Hong Kong 93 Trinidad and Tobago 11 7 .. 7 64 66 64 36 23 24 .. 29 23 29 .. 71 39 107 7 5 (.) 4 . 94 Singapore 10 11 80 46 22 47 10 43 123 . 12 95 Iran, Islamic Rep. 13 . . 63 . . 17 .. 24 . . 20 . . 6 96 Iraq 20 .. 50 . 16 . 31 . 38 . . 15 High-income oil exporters 15 w 30 to 32 tt' 34 to 19 to 30 to 53 to 36 tt' 61 to 48 to 34 to 6 to 97 Oman .. .. ,, .. . .. .. .. .. 98 Ubya 14 34 36 31 29 23 50 35 53 43 12 99 SaudiArabia 100 Kuwait 18 13 31 20 34 26 36 49 14 16 35 21 48 60 32 30 60 68 44 60 21 34 45 3 9 101 United Arab Emirates . . 27 . 17 .. 27 .. 56 .. 61 .. 29 Industrial market economies 15 to 17w 61 to 62w 23 to 21 to 23w 21 w 12w 18 to (.) to (.) to 102 Spain 103 Ireland 7 14 12 19 71 72 67 58 25 24 18 22 21 15 21 23 11 35 24 61 3 9 3 2 104 Italy 105 NewZealand 106 United Kingdom 15 12 17 19 16 22 62 63 64 62 62 61 20 27 20 19 23 17 23 25 19 18 22 17 16 22 20 27 32 29 2 1 1 3 (.) (.) 107 Belgium 13 17 64 66 23 15 23 17 36 77 (.) 2 108 Austria 13 18 59 57 28 25 27 25 26 37 1 (.) 109 Netherlands 15 17 59 60 27 18 26 23 43 63 1 5 110 France 13 16 61 64 25 19 26 19 14 25 1 (.) 111 Japan 8 10 58 59 32 28 33 31 11 15 1 3 112 Finland 113 Germany, Fed. Rep. 14 15 19 20 60 56 54 57 28 28 24 21 26 29 26 23 21 18 31 31 2 3 2 114 Denmark 115 Australia 16 11 26 17 59 63 54 64 26 28 19 21 25 26 20 19 29 15 37 15 2 2 (.) 2 1 116 Sweden 18 28 56 50 27 18 26 22 22 37 1 4 117 Canada 15 21 60 57 26 19 25 22 19 29 (.) 4 118 Norway 15 19 56 47 30 25 29 35 41 48 1 10 119 UnitedStates 120 Switzerland 17 10 19 62 60 65 62 20 19 24 21 16 5 29 38 8 1 1 3 14 30 30 25 (.) East European nonmarket economies 121 Hungary b 10 75 61 26 27 25 28 .. 40 2 122 Poland . . 10 . . 63 . . 26 . . 27 . . 18 . . 1 123 Albania . . . . . . . . . . . . . . S S 124 Bulgaria . . . . .. .. .. . . .. .. .. .. .. 125 Czechoslovakia . . . . . , . . . , . . , , . . . S S 126 German Oem. Rep. 127 Romania 128 USSR a. Figures in italics are for 1983, not 1984. b. General government consumption figures are not available separately; they are included in private consumption. 189 Table 6. Agriculture and food Value added Food aid Fertilizer consumption Average index of in agriculture Cereal imports in cereals (hundreds of grams of food production (millions of (thousands of (thousands of plant nutrient per per capita 1980 dollars) metric tons) metric tons) hectare of arable land) (1974-76=100) 1970 1984 1974 1984 1974175 1983/84 1970 1983 1982-84 Low-income economies 24,017 t 26,430 t 5,651 4,878 178 w 661 w 116w China and India 15,101 t17,355t 1,582t 580 230 iv 923 w 121 ii' Other low-income 8,916/ 9,075/ 4,069 4,298 78 w 195 w 102 w Sub-Saharan Africa 2,560/ 5,195/ 796/ 2,087 23 w 49 w 92 w 1 Ethiopia 1,663 1,971 118 506 54 172 4 35 100 2 Bangladesh 5,427 6,703 1,866 2,136 2,076 1,163 142 596 99 3 Mali 403 606 281 367 107 111 29 75 101 4 Zaire 1,503 1,866 343 246 1 53 8 14 92 5 Burkina Faso 444 521 99 89 28 57 3 50 94 6 Nepal 1,102 1,364 18 27 0 30 30 137 91 7 Burma 1,705 3,403 26 7 9 6 34 158 124 8 Malawi 257 427 17 20 (.) 3 52 164 100 9 Niger 851 649 155 45 73 13 1 5 113 10 Tanzania 1,583 431 364 148 136 30 42 100 11 Burundi 468 585 7 14 6 11 5 21 106 12 Uganda 2,388 2,682 37 20 0 10 13 98 13 Togo 212 238 6 95 11 9 3 21 92 14 Central African Rep. 256 324 7 30 1 8 11 7 94 15 India 45,772 59,681 5,261 2,170 1,582 371 114 394 110 16 Madagascar 1,111 1,269 114 172 7 74 56 46 89 17 Somalia 434 42 330 111 177 31 23 69 18 Benin 463 8 65 9 6 33 30 97 19 Rwanda 3 20 19 25 3 3 112 20 China 69,147 134,877 9,840 15,185 0 209 418 1,806 128 21 Kenya 1,198 2,183 15 560 2 122 224 376 82 22 Sierra Leone 261 330 72 61 10 16 13 11 95 23 Haiti 83 205 25 72 4 36 90 24 Guinea 794 63 186 49 43 18 6 93 25 Ghana 3,360 2,522 177 311 33 74 9 77 73 26 Sri Lanka 812 1,224 951 685 271 391 496 740 125 27 Sudan 1,610 2,203 125 530 46 450 31 67 93 28 Pakistan 5,007 6,581 1,274 291 584 395 168 586 104 29 Senegal 603 567 341 698 27 151 20 48 66 30 Afghanistan 5 20 10 100 24 63 102 31 Bhutan 3 11 0 7 (.) 10 104 32 Chad 339 37 74 20 69 7 17 95 33 Kampuchea, Oem. 223 25 226 43 13 16 107 34 Lao PDR 53 37 8 2 4 6 129 35 Mozambique 62 392 34 297 27 77 73 36 VietNam 1,854 436 64 2 512 471 123 Middle-income economies 41,135/ 84,988t 2,329 4,719 214w 443 ii' 104 iv Oil exporters 18,022t 45,487t 1,135 2,712 140w 466 iv 102 iv Oil importers 23,113t 39,501 1,1941 2,007 258 w 431 w 105 ii' Sub-Saharan Africa 1,361 t 4,849 114 503 46 w 109 iv 92 iv Lower middle-income 17,128/ 32,838 t 1,624 t 4,685 76w 431w 104 iv 37 Mauritania 200 215 115 277 48 129 6 95 38 Liberia 235 334 42 109 3 47 55 75 91 39 Zambia 473 627 93 236 5 76 71 130 74 40 Lesotho 94 49 141 14 50 17 151 78 41 Bolivia 541 723 209 320 22 284 13 18 84 42 Indonesia 12,097 21,229 1,919 1,926 301 466 119 745 120 43 Yemen Arab Rep. 158 612 33 5 57 84 44 Yemen, PDR 149 291 (.) 16 (.) 103 83 45 Cote divoire 1,733 2,542 172 545 4 0 71 107 110 46 Philippines 5,115 8,694 817 964 89 54 214 320 107 47 Morocco 2,784 2,905 891 2,610 75 448 130 293 91 48 Honduras 475 687 52 130 31 97 160 159 99 49 El Salvador 740 868 75 221 4 263 1,048 1,132 88 50 PapuaNewGuinea 655 926 71 174 76 182 95 51 Egypt, Arab Rep. 3,282 4,795 3,877 8,616 610 1,783 1,282 3,605 91 52 Nigeria 17,943 19,062 389 2,351 7 0 3 87 96 53 Zimbabwe 556 823 56 334 0 76 466 576 69 54 Cameroon 1,492 1,991 81 121 4 1 28 48 83 55 Nicaragua 410 606 44 135 3 56 184 483 78 56 Thailand 5,631 9,829 97 150 0 13 76 240 115 57 Botswana 20 74 21 59 5 32 14 10 61 58 Dominican Rep 953 1,235 252 436 16 148 354 288 99 59 Peru 1,716 1,893 637 1,205 37 207 297 224 84 60 Mauritius 178 152 160 188 22 22 2,081 2,538 88 61 Congo, People's Rep. 147 178 34 113 2 112 24 96 62 Ecuador 1,054 1,413 152 369 13 14 123 283 89 63 Jamaica 205 235 340 432 54 886 628 89 64 Guatemala 138 142 9 19 224 474 101 65 Turkey 8,701 13,400 1,276 1,627 16 0 166 581 103 Note: For data comparability and coverage, see the technical notes, 190 Value added Food aid Fertilizer consumption Average index of in agriculture Cereal imports in cereals (hundreds of grams of food production (millions of (thousands of (thousands of plant nutrient per per capita 1980 dollars) metric tons) metric tons) hectare of arable land) (1974-76=100) 1970 1984 1974 1984 1974/75 1983/84 1970b 1983 1982-84 66 CostaRica 666 961 110 139 1 39 1086 1,323 87 67 Paraguay 678 1381 71 75 10 8 58 46 105 68 Tunisia 712 1358 307 1.071 59 146 82 160 84 69 Colombia 4,247 6,918 503 789 28 3 310 563 104 70 Jordan 187 311 171 835 79 24 20 394 136 71 SyrianArabRep. 1,057 2,415 339 1,855 47 17 67 320 123 72 Angola 149 375 0 69 45 25 81 73 Cuba 1,622 2,105 0 1,539 1.699 129 74 Korea, Oem. Rep . 1,108 200 . . 1,484 3,452 113 75 Lebanon 354 506 26 18 1,279 1,191 145 76 Mongolia . 28 54 . . . 18 116 90 Upper middle-income 24,0071 52,1501 7051 . . 248 a' 455w 103 ii' 77 Chile 1,597 2,142 1737 1,038 323 21 317 249 102 78 Brazil 18,425 34,503 2,485 5,336 31 3 169 307 115 79 Portugal . . 2,241 1,860 3,046 (.) . . 411 655 86 80 Malaysia 3,511 6,593 1,017 2,064 1 . 436 1,115 112 81 Panama 275 353 63 85 3 2 391 396 99 82 Uruguay 913 879 70 98 6 0 392 259 105 83 Mexico 11,125 17,286 2,881 8.484 1 246 612 104 84 Korea, Rep. of 8,176 12,234 2,679 6,334 234 0 2,466 3,311 109 85 Yugoslavia 5,433 8.259 992 34 766 1,178 109 86 Argentina 3,947 5,455 (.) (.) (.) . 24 35 109 87 South Africa 3,571 127 3,240 425 649 83 88 Algeria 1,731 2,790 1,816 4,155 54 7 174 213 79 89 Venezuela 2,477 3,425 1,270 2,653 165 385 88 90 Greece 4,929 6,332 1,341 280 858 1,611 103 91 Israel . . 1,176 1,804 53 0 1,394 1.831 98 92 HongKong 321 251 657 833 () . , , , . 99 93 Trinidad and Tobago 160 , . 208 269 0 . 640 494 60 94 Singapore 118 149 682 2.537 (.( . 2.667 7.833 68 95 Iran, Islamic Rep. 10,314 , , 2,076 5,349 0 . 76 758 99 96 Iraq .. . . 870 4,511 (.) 0 35 165 85 High-income oil exporters 1,379 I 10,067 I 58w 918 a' 97 Oman , . . 52 214 (.) 884 98 Libya 168 572 612 1,005 64 432 94 99 Saudi Arabia 833 1.917 482 7,643 44 1.777 98 100 Kuwait 42 108 101 770 (.) 4,200 101 UnitedArabEmirates . . 294 132 435 (.) 2,991 Industrial market economies 65,494 I 62,579 I 985 a' 1,233 ri 107 a' 102 Spain 10,888 . . 4,675 3,973 595 710 107 103 Ireland . , 631 524 3,573 6,973 101 104 Italy 22,099 25,478 8,100 7,097 962 1,689 111 105 NewZealand , , . . 92 136 8,875 11,468 108 106 United Kingdom 7,907 11,476 7,541 2,991 2,521 3,746 124 107 Belgiumc 2,370 3,272 4,585 6,638 5,686 5,467 104 108 Austria 2,950 3,091 165 67 2,517 2,520 118 109 Netherlands 3,986 7,180 7,199 4,655 7,165 7,888 120 110 France 24,282 30,484 654 1,747 2,424 3.116 111 111 Japan 38,299 39,972 19,557 26.944 3,849 4,370 91 112 Finland 4,379 4,351 222 53 1.931 2,220 102 113 Germany. Fed. Rep. 15,442 20,589 7.164 4,444 4,208 4,211 116 114 Denmark 2,427 4,137 462 364 2,254 2,639 122 115 Australia 7,090 11,083 2 20 246 242 105 116 Sweden 3,983 4,252 301 118 1,639 1,603 112 117 Canada 8,501 10,634 1,513 627 192 487 118 118 Norway 2,035 2,481 713 330 2,471 2,970 117 119 United States 62,108 66,669 460 785 800 1,045 105 120 Switzerland . . . 1,458 1,066 3,842 4.296 117 East European nonmarket economies 18,5431 .50,425 I 635 ii' 1,221 ii' 103 a' 121 Hungary 2,782 4,677 408 74 1,485 2,998 126 122 Poland .. 9,751 4,185 2,718 42 1,715 2,314 94 123 Albania ,. . . 48 4 745 1,446 107 124 Bulgaria . 649 55 1,446 2,437 119 125 Czechoslovakia . . ,. 1,296 697 2,402 3,435 118 126 German Dem Rep. , , , 2,821 3,153 3,202 2,901 107 127 Romania , ,. 1,381 510 559 1,577 119 128 USSR . . , , 7,755 43,214 437 987 101 a. Figures in italics are for 1983, not 1984. b. Average for 1969-71, c Includes Luxembourg. 191 Table 7. Industry Distribution of manufacturing value added (percent; 1980 prices) Value added Textiles Machinery and in manufacturing Food and and transport Other (millions of agriculture clothing equipment Chemicals manufacturing 1980 dollars) 1970 1983 1970 1983 1970 1983 1970 1983a 1970 1983 1970 1983 Low-income economies China and India Other tow-income Sub-Saha ran Africa 1 Ethiopia 30 38 34 28 1 2 2 33 32 282 453 2 Bangladesh 18 18 51 40 3 6 13 22 15 14 437 860 3 Mali 22 25 54 57 5 6 2 2 17 10 59 82 4 Zaire 41 44 16 11 5 .. 5 7 33 38 213 168 5 BurkinaFaso 74 .. 4 . . . . 6 .. 17 . 73 157 6 Nepal .. 69 13 2 17 7 Burma 30 37 6 12 2 2 4 6 57 44 373 687 8 Malawi 33 46 23 18 3 . . . . . 42 36 72 136 9 Niger 15 33 42 27 . 11 43 28 53 152 10 Tanzania 23 26 27 26 7 9 9 9 34 31 336 11 Burundi 78 . 5 . . 17 52 91 12 Uganda 59 59 8 17 (.) 8 2 26 22 311 137 13 Togo 51 43 38 38 . . 12 19 149 61 14 Central African Rep. 14 41 72 38 (.) 1 3 4 11 17 114 47 15 India 11 13 37 27 14 18 8 11 30 32 16,294 27,091 16 Madagascar 22 23 31 42 10 4 5 32 31 492 395 17 Somalia 69 ,. . . 4 (.) (.) . . 1 . 27 . .. 18 Benin .. .. .. .. .. .. 117 19 Rwanda 75 72 . .. 2 3 23 25 20 China . . .. . . . 54,806 152,731 21 Kenya 39 37 10 12 11 15 10 8 29 29 263 881 22 Sierra Leone 23 Haiti 35 19 42 .. 42 . .. 15 . .. 3 2 . 6 61 22 52 .. 37 52 24 Guinea 25 Ghana . .. 42 19 . .. . . . .. . 36 49 . .. 409 39 14 27 3 1 5 5 211 26 Sri Lanka 45 44 8 15 7 4 6 7 34 31 548 742 27 Sudan 30 38 24 2 3 2 4 42 56 298 521 28 Pakistan 19 28 57 23 7 10 7 21 11 18 2,359 5,205 29 Senegal 55 54 23 20 4 6 4 16 17 366 640 30 Afghanistan . .. . . . . . . . . 31 Bhutan 32 Chad 46 48 37 (.) (.) 17 18 27 33 Kampuchea, Dem. 34 LaoPDR 35 Mozambique 36 Viet Nam 40 .. 16 . 5 . . 5 . 33 Middle-income economies Oil exporters Oil importers Sub-Saharan Africa Lower middle-income 37 Mauritania 91 91 9 9 32 48 38 Liberia 39 Zambia 16 49 24 44 . 8 11 . , .. 10 . 8 . . . 8 . . 9 . . 84 26 75 27 46 524 69 720 40 Lesotho ,, ., .. .. ,. ., .. .. .. 3 41 Bolivia 24 36 43 16 1 2 4 4 28 42 369 646 42 Indonesia 18 21 7 7 5 7 7 6 62 60 2,350 9,611 43 Yemen Arab Rep. 43 254 44 Yemen, PDR .. .. .. .. . .. 45 Coted'lvoire 24 38 24 27 18 8 6 8 29 19 680 1,204 46 Philippines 42 44 11 14 9 8 6 7 32 28 4,383 9,308 47 Morocco 28 32 27 23 9 6 6 9 30 31 1,772 3,170 48 Honduras 43 50 13 11 (.) 1 2 5 41 33 196 309 49 El Salvador 46 40 24 22 4 6 3 10 24 21 401 448 50 Papua New Guinea 51 Egypt, Arab Rep. .. 22 .. 20 . 35 26 . . 5 . 13 . . . , 7 . . 9 . 32 . . 32 . 95 3,095 227 8,950 52 Nigeria 32 30 11 9 10 20 9 14 39 27 1,425 4,252 53 Zimbabwe 21 26 19 17 10 9 8 10 42 38 798 1,326 54 Cameroon 55 Nicaragua 37 60 41 62 . 10 14 ,, 4 2 2 11 5 5 7 54 17 52 16 278 419 715 593 56 Thailand 32 23 21 . 6 12 1 6 8 36 56 2,526 7,837 57 Botswana . . . . . . . 11 55 58 DominicanRep. 83 69 5 5 () (.) 3 5 8 20 527 1,115 59 Peru 29 26 13 12 38 38 3,903 4,435 60 Mauritius 61 Congo, People's Rep. 61 70 . 52 . 17 5 2 . 4 11 7 3 .. .. 5 4 3 11 . 6 . 23 21 . 38 81 117 170 191 62 Ecuador 51 36 19 20 3 4 27 38 835 2,283 63 Jamaica 41 43 9 6 (.) 7 . 1 11 16 32 35 513 458 64 Guatemala 65 Turkey 79 16 21 . . 27 16 . 12 .. 16 . . . 8 . .. 11 20 38 37 . . 6,975 14,263 Note: For data comparability and coverage, see the technical notes. 192 Distribution of manufacturing value added (percent; 1980 prices) Value added Textiles Machinery and in manufacturing Food and and transport Other (millions of agriculture clothing equipment Chemicals manufacturing 1980 dollars) 1970 1983 1970 1983 1970 1983 1970 1983 1970 1983 1970 1983 66 Costa Rica 55 8 .. 6 . . 8 .. 23 .. 439 806 67 Paraguay 57 42 17 18 1 2 3 3 23 36 305 651 68 Tunisia 26 24 28 21 3 8 10 10 33 37 353 1,289 69 Colombia 37 42 18 14 5 8 6 6 34 31 3,297 5,545 70 Jordan 26 26 2 4 72 71 102 509 71 Syrian Arab Rep. 27 32 38 28 3 6 7 28 30 1,159 2,341 72 Angola 73 Cuba 73 53 6 6 10 15 25 74 Korea, Dem. Rep. 75 Lebanon 76 Mongolia 29 22 35 30 34 45 Upper middle-income 77 Chile 23 26 17 9 6 3 7 8 47 54 5,275 4,940 78 Brazil 21 21 15 11 16 17 4 11 44 40 26,963 56,878 79 Portugal 16 17 32 27 12 12 5 7 35 37 . . 7,897 80 Malaysia 26 22 4 7 15 24 5 5 49 43 1,773 6,080 81 Panama 30 43 10 10 1 1 4 8 55 38 249 345 82 Uruguay 30 31 17 22 9 6 9 9 35 31 1,667 1,670 83 Mexico 29 28 16 13 11 12 9 13 35 34 21,533 41,346 84 Korea, Rep. ot 13 10 16 19 9 24 16 12 46 36 4,047 21,788 85 Yugoslavia 13 11 18 15 21 23 5 7 44 43 7,629 19,512 86 Argentina 22 22 13 10 19 16 7 9 40 42 12,615 12,682 87 South Africa 12 13 10 9 26 21 7 9 46 48 9,747 88 Algeria 33 18 29 26 5 7 4 3 29 47 1,578 6,061 89 Venezuela 22 26 10 5 6 6 8 7 55 56 5,790 9,528 90 Greece 21 21 21 22 14 12 6 8 39 38 3,852 6,512 91 Israel 10 13 12 11 20 25 7 8 51 43 .. 92 Hong Kong 4 . 50 .. 16 1 . . 28 .. 3,148 6,944 93 Trinidad and Tobago 15 26 5 6 5 15 5 8 69 44 711 94 Singapore 8 4 8 4 20 51 3 5 61 36 1,148 3,451 95 Iran, Islamic Rep. 25 12 18 21 8 15 7 4 42 48 4,711 11,596 96 Iraq 19 24 . 18 4 .. 35 .. .. High-income oil exporters 97 Oman 98 Libya 66 28 :. 196 760 99 Saudi Arabia 7 10 93 90 2,987 7,230 100 Kuwait 3 8 94 85 696 1,790 101 United Arab Emirates 2,428 Industrial market economies 102 Spain 8 13 22 15 24 21 8 7 39 44 29,582 103 Ireland 35 36 19 11 12 15 5 14 29 24 . 104 Italy 10 12 18 18 23 26 8 7 40 38 .. 105 New Zealand 26 24 12 12 17 17 5 5 41 41 106 United Kingdom 11 14 8 6 34 33 7 10 39 36 130,154 120,228 107 Belgium 16 19 13 9 23 25 10 12 37 35 21,769 30,660 108 Austria 15 15 12 9 21 24 5 7 47 45 14,400 21,534 109 Netherlands 14 .. 7 .. 24 10 .. 44 .. 30,533 39,185 110 France 16 16 10 7 30 34 10 8 34 34 120,210 173,370 111 Japan 12 10 8 6 27 38 6 7 47 40 157,947 387,272 112 Finland 13 11 9 7 18 22 5 6 55 53 8,471 14,107 113 Germany, Fed. Rep. 10 10 8 5 37 41 8 9 38 34 240,808 310,384 114 Denmark 21 23 7 6 23 24 6 9 43 39 8,257 11,935 115 Australia 19 18 7 7 23 19 5 8 46 48 24,857 29,059 116 Sweden 9 9 6 3 28 32 5 7 52 50 23,781 27,151 117 Canada 15 14 8 7 19 22 6 7 52 49 34,285 46,210 118 Norway 15 12 6 3 27 28 5 8 47 49 7,521 8,628 119 United States 9 10 7 6 30 33 7 9 46 42 448,167 592,504 120 Switzerland 12 15 9 8 26 25 8 12 45 40 East European nonmarket economies 121 Hungary 11 11 15 11 25 29 8 11 41 38 4,257 8,343 122 Poland 22 18 19 15 23 29 7 8 29 30 123 Albania 124 Bulgaria 30 20 17 14 11 20 6 7 36 39 125 Czechoslovakia 11 8 12 10 30 39 7 8 40 35 126 German Dem. Rep. 12 9 15 12 27 34 12 13 35 32 127 Romania 25 16 8 9 21 34 9 11 36 30 128 USSR 27 22 19 15 19 29 5 6 29 28 a. Figures in italics are for 1982, not 1983. 193 Table 8. Commercial energy Energy consumption Average annual energy per capita Energy imports growth rate (percent) (kilograms as a percentage of Energy production Energy consumption of oil equivalent) merchandise exports 1965-73k 1973-84 1965-73 1973-84 1965 1984 1965 l984b Low-income economies 10.0w 6.1 w 9.7w 5.3w 130 w 288 w 8w China and India 10.1 w 6.0w 10.2w 5.5 w 147w 360 w 17 U' Other low-income 7.8w 6.7 w 6.1 w 3.1 w 67 w 79 W 7w Sub-Saharan Africa 10.4w 6.5 w 9.3 w 0.9 w 46 w 56 w 8 u' 1 Ethiopia 11.1 6.0 11.4 3.4 10 17 8 48 2 Bangladesh . . 13.0 7.9 40 .. 20 3 Mali 80.5 13.2 4.6 6.5 15 26 16 4 Zaire 4.8 8.8 60 1.2 67 77 6 5 Burkina Faso .. ., 8.0 9.5 8 21 11 86 6 Nepal 27.2 10.9 8.8 8.6 6 16 .. 49 7 Burma 9.6 6.9 6.5 4.8 39 71 4 8 Malawi 31,1 8.0 8.3 3.6 25 43 7 9 Niger .. , . 147 112 8 42 9 10 Tanzania 6.8 6.2 105 -2.0 37 38 11 Burundi . . 28.5 5.6 12.2 5 17 11 12 Uganda 3.7 -3.1 8.4 -52 36 22 13 Toga -6.1 31.6 129 10.0 25 109 6 14 Central African Rep. 10.6 3.5 9.8 4.5 22 33 7 15 India 3.7 79 51 6.5 100 187 8 59 16 Madagascar 8.6 3.4 13.6 0.5 33 45 8 32 17 Somalia .. , . 9.3 14.9 15 83 9 18 Benin . . . . 19.7 1.8 21 43 14 53 19 Rwanda 15.7 -1.2 11.4 14.7 8 43 10 20 China 11.8 5.6 11.9 5.3 178 485 .. 1 21 Kenya 9.9 14.1 7.1 1.0 114 111 . . 51 22 Sierra Leone . . .. 4.6 3.5 104 77 11 63 23 Haiti . . 9.0 6.2 6.2 25 55 24 Guinea 17.1 1.8 2.3 1.3 56 52 25 Ghana 43.4 -1.9 15.0 -1.8 76 101 6 26 Sri Lanka 12.0 6.7 5.2 3.3 107 143 6 33 27 Sudan 14.7 7.9 12.1 -3.0 67 62 5 28 Pakistan 5.1 8.7 1.4 69 136 188 7 56 29 Senegal .. .. 6.0 4.0 79 118 8 30 Afghanistan 46.7 0.1 71 16 30 48 8 31 Bhutan .. .. .. . . .. 32 Chad .. .. .. .. .. .. 23 33 Kampuchea, Dem. .. .. 19.8 0.9 19 58 7 34 Lao PDR .. 16.9 16.6 -0.9 22 35 35 Mozambique 4.6 11.9 9.3 0.9 81 93 13 36 VietNam -3.4 5.1 6.7 -1.5 106 88 Middle-income economies 8.5 w 0.3w 7.9 u' 5.1 w 384 w 743 w 8 U' 21 iv Oil exporters 9.1 w -1.2w 6.9 w 6.9 iv 300 iv 615 iv 5 U' 9 iv Oil importers 6.0 w 5.5 w 8.4 w 4.2w 453 iv 856 w lOU' 27 U Sub-Saharan Africa 30.5w -2.3w 7.8 w 6.1 w 89 w 175 iv 5w Lower middle-income 16.2w 2.5w 7.6w 5.6w 200w 399iv 9w 37 Mauritania .. . , 16.0 32 48 127 2 38 Liberia 37.0 1.0 16.1 20 181 358 6 17 39 Zambia 18.6 5.7 -0.1 1.6 464 422 5 5 40 Lesotho .. .. .. . , .. .. 41 Bolivia 17.8 (.) 5.2 5.8 156 276 1 42 Indonesia 12.7 3.3 6.6 8.0 91 205 3 20 43 Yemen Arab Rep. .. .. 16.5 21.7 7 117 44 Yemen, PDR .. .. -107 7.0 982 682 63 45 Coted'Ivoire 0.5 44.3 10.9 4.1 109 161 5 16 46 Philippines 4.6 21.8 9.0 2.3 160 271 12 44 47 Morocco 2.6 -0.7 8.9 5.0 124 256 5 47 48 Honduras 15.6 9.9 10.4 3.5 111 205 5 28 49 ElSalvador 2.1 13.3 5.7 2.9 140 188 5 57 50 Papua New Guinea 16.5 8.0 20.3 4.1 56 232 7 25 51 Egypt,ArabRep. 10.0 15.6 -0.7 11.2 313 562 11 10 52 Nigeria 33.4 -4.5 7.1 12.2 34 129 7 3 53 Zimbabwe 1.1 -2.6 10.7 0.4 441 468 (.) 54 Cameroon 12 44 1 6.5 8.3 67 138 6 3 55 Nicaragua 4.8 3.8 9.8 07 187 234 6 46 56 Thailand 11.0 17.4 147 59 80 320 11 33 57 Botswana 8.4 7.0 7.8 8.2 207 409 58 Dominican Rep. 4.9 34.8 18.6 2.4 130 386 7 71 59 Peru 2.0 10.2 5.2 3.6 403 575 3 3 60 Mauritius 3.1 0.8 11.9 -0.1 163 308 6 23 61 Congo, People's Rep. 39.5 11.3 10.9 5.9 90 233 8 62 Ecuador 36.6 3.0 9.3 14.8 163 796 11 1 63 Jamaica -1.8 2.7 10.2 -3.0 707 919 12 54 64 Guatemala 18.3 21.1 7.1 2.0 148 178 9 65 Turkey 5.7 3.9 10.0 4.5 258 634 12 53 Note: For data comparability and coverage, see the technical notes. 194 Energy consumption Average annual energy Energy imports per capita growth rate (percent) (kilograms as a percentage of Energy production Energy consumption of oil equivalent) merchandise exports 1965-73 1973-84 1965-73 1973-84 1965 1984 1965 1984b 66 Costa Rica 102 9.3 12.2 2.7 267 486 8 22 67 Paraguay 82 91 8.9 86 231 14 68 Tunisia 587 39 87 78 170 495 12 19 69 Colombia 22 39 6.6 53 413 758 1 14 70 Jordan 43 14.8 226 813 33 74 71 Syrian Arab Rep. 164.4 3.3 97 11.8 212 799 13 72 Angola 471 05 106 39 111 197 2 73 Cuba 7.2 129 5.6 35 604 1083 12 74 Korea, Oem, Rep 9.3 3.0 9.5 3.5 504 2058 75 Lebanon 2.4 -07 61 -3.8 713 656 50 76 Mongolia 11.2 8.4 9.1 8.8 . . 1,168 Upper middle-income 6.6w -0.6w 8.1 w 4.9w 630 it' 1,22111' 8w 19w 77 Chile 41 20 72 08 657 796 5 78 Brazil 8.7 9.4 11 6 4.7 286 753 14 30 79 Portugal 3.8 0.3 87 3.7 506 1,215 13 44 80 Malaysia 608 167 85 7.0 312 716 10 12 81 Panama 27 15.2 8.2 -3.5 517 504 138 82 Uruguay 5.2 10.1 1.8 03 765 738 13 28 83 Mexico 4.5 15.9 72 79 622 1,308 4 1 84 Korea, Rep of 2.9 5.0 153 8.4 237 1,171 18 25 85 Yugoslavia 3.5 3.8 6.8 3.5 898 1.845 7 34 86 Argentina 6.4 4.4 59 2.6 975 1,460 8 6 87 South Africa 3.5 7.7 5.2 4.1 1,776 2,237 10 (.) 88 Algeria 6.7 3.3 61 15.6 226 1,140 (.) 2 89 Venezuela 0.1 -3.3 43 4.5 2,269 2.509 (.) 90 Greece 12.2 9.3 11.6 3.7 615 1.858 29 54 91 Israel 53.4 -33.2 6.1 2.2 1,574 1,890 13 25 92 Hong Kong 9.7 7.4 424 1,162 4 6 93 Trinidad and Tobago 0.6 0.2 34 6.1 2,554 4.107 59 4 94 Singapore 205 4.4 670 2.520 17 33 95 Iran, Islamic Rep 16.3 -11.6 13.3 1.4 537 1,044 (.) 96 Iraq 4.5 -71 62 64 399 692 (.) High-income oil exporters 11.7w -3.7w 11.2 it' 8.8 ii' 1,721 iv 3,593 iv (.)w 97 Oman 57.2 4.6 89.7 85 14 2,405 98 Libya 8.6 -4.8 148 18.3 222 3,107 2 99 Saudi Arabia 15.7 -30 12.4 7.4 1,759 3,602 (.) (,) 100 Kuwait 4.3 -9.1 2.6 2.8 3,974 (.) (.) 101 United Arab Emirates 24.1 -2.2 653 18.6 108 5,369 3 Industrial market economies 3.3w 1.9w 5.2 to 0.1 w 3,745 ii' 4,877 iv 11w 23w 102 Spain 3,5 3.6 8.7 1.9 901 1.801 31 46 103 Ireland -1.4 13.4 5.8 2.7 1,504 2,395 14 12 104 Italy 21 06 70 (.) 1,568 2.487 16 32 105 New Zealand 45 48 47 1.7 2,622 4,005 7 15 106 United Kingdom -0.7 7.8 2.6 -1.3 3,481 3,441 13 15 107 Belgium -9.0 4.6 60 -09 3,402 4,402 9 20 108 Austria -02 01 66 0.4 2,060 3,345 10 19 109 Netherlands 25.7 -10 91 -09 3,134 4,744 12 22 110 France -3.1 6.1 6.0 05 2.468 3,516 16 27 111 Japan -2.0 4.1 122 0.4 1,474 3.135 19 35 112 Finland 03 13.0 84 2.3 2.233 4,944 11 23 113 Germany Fed. Rep. -0.1 0.2 49 -03 3,197 4,238 8 18 114 Denmark -32.5 36.5 48 -1.0 2.911 3,495 13 19 115 Australia 160 43 64 1.8 3.287 4.763 10 9 116 Sweden 28 6.0 4.5 0.4 4.162 5,728 12 18 117 Canada 95 1.7 6.1 18 6.007 9.148 7 6 118 Norway 60 15.2 5.4 26 4,650 8.575 11 8 119 United States 30 07 40 '-0 1 6.535 7,302 8 29 120 Switzerland 2.5 39 6.0 09 2,501 3,777 8 12 East European nonmarket economies 4.3w 3.4w 4.6w 3.0w 2,523 iv 4,360 w 121 Hungary 04 1.5 3,3 2.7 1.825 2.986 12 21 122 Poland 4.5 10 48 2.2 2,027 3.197 21 123 Albania 142 7.0 72 7.5 415 1,062 124 Bulgaria 0.8 47 7.7 3.9 1,788 4,366 125 Czechoslovakia 1.1 0.8 3.6 1.2 3.374 4,489 30 126 German Oem. Rep. 06 2.0 2.5 1.3 3,762 5,225 127 Romania 56 20 7.8 3.4 1,536 3.346 128 USSR 4,7 3.8 47 3,3 2,603 4,627 a. Figures in italics are for 1966-73, not 1965-73. b. Figures in italics are for 1982 or 1983, not 1984 195 Table 9. Growth of merchandise trade Merchandise trade Average annual growth rates (millions of dollars) (percent) Terms of trade Exports Imports (1980=100) Exports Imports 1984 1984b 1965-73 1973-84 1965-73 1973._84c 1982 1984 Low-income economies 48,319 t 64,903 t 1.7 iv 5.4w -1.2 iv 5.0w 89 in 10Cm China and India 34,259 t 41,152 t . 7.9 iv . . 8.1 iv 105 in 104 in Other low-income 14060 t 23,751 t 1.5 iv 1.4 iv 1.3 iv 1.3w 88 in 99 in Sub-Saharan Africa 7,892 1 12,129 I 3.0 iv -0.8w 4.4 iv -1.4 w 88 in 99 in 1 Ethiopia 417 826 2.9 0.4 -0.2 4.6 90 104 2 Bangladesh 934 2,042 -6.6 2.9 -8.3 4.2 105 106 3 Mali 167 344 13.1 4.7 8.5 3.2 105 116 4 Zaire 1,584 1,115 6.4 4.1 9.4 -45 79 84 5 Burkiria Faso 91 255 -1.0 09 7.5 2.9 100 117 6 Nepal 111 437 ,. 7 Burma 378 239 -4.9 3.2 -67 -1.8 86 89 8 Malawi 309 268 38 2.4 6.4 -1.5 107 137 9 Niger 311 361 6.1 178 4.4 8.8 88 81 10 Tanzania 456 782 09 -4.7 71 -43 88 94 11 Burundi 98 186 . . , . . . . . 12 Uganda 399 392 0.2 -6.2 -2.5 22 75 98 13 Togo 240 271 41 5.2 6.6 47 84 88 14 CentralAfricanRep. 115 178 -0.6 1.4 -03 2.6 94 99 15 India 9,437 15,002 24 3.3 -5.7 5,4 104 107 16 Madagascar 349 480 5.4 -4.6 1.5 -4.0 80 105 17 Somalia 61 413 57 -0.7 5.1 5.9 94 93 18 Benin 112 363 14.3 -1.9 12.1 1.8 77 116 19 Rwanda 83 290 6.5 2.5 4.6 11.6 64 71 20 China 24,822 26,150 . 101 . 10.2 106 101 21 Kenya 1,078 1,547 3.8 -2.3 5.9 -1.7 92 101 22 Sierra Leone 148 166 3.7 -5.5 10 -6.8 85 95 23 Haiti 207 338 . . . . . . , . . 24 Guinea 457 313 . . . , , , . . . 25 Ghana 571 591 35 -40 -33 -7.4 84 99 26 Sri Lanka 1,454 1,847 -4 7 3.5 -3.3 4.6 88 111 27 Sudan 732 1,417 3.8 -0.2 4.9 1.2 87 96 28 Pakistan 2,592 5,873 3.7 7.4 -'2.9 7.5 93 88 29 Senegal 416 1,039 -1.3 -0.8 5.6 -1.2 91 98 30 Afghanistan 5.9 6.5 '-0.7 44 99 114 31 Bhutan ,, . . . . ., -24 . . . -29 . 32 Chad 8.4 -7.7 101 108 33 Kampuchea, Oem. .. , , .. . , 34 Lao POR 11 48 . . . . .. .. 35 Mozambique 185 532 3.6 -10.7 7.2 -4.7 84 104 36 VietNam . . .. . . .. ., .. Middle-income economies 355,439 1 346,948 1 6.3w 0.8w 8.4 iv 4.4 iv 94 in 95 in Oil exporters 149,298 121,676 6.2 iv -4.2 iv 6.0 ii' 6.8w 106 in 99 in Oil importers 205,793 225,272 6.7 iv 7.3 w 9.4 iv 3.2 iv 89 ni 94 in Sub-Saharan Africa 25,485 17,923 8.2iv -5.0w 6.8 iv 4.9 iv 94 ni 101 in Lower middle-income 96,964 1 111,245 I 7.0 iv 0.7 iv 4.9 ii' 4.9 a' 91 in 95 in 37 Mauritania 297 246 9.7 2.0 15.4 -0,7 101 95 38 Liberia 452 363 89 -2.3 3.7 -5 1 93 102 39 Zambia 824 690 -0.3 -2,4 3,0 -7.9 72 74 40 Lesothod . . . . 41 Bolivia 773 631 5.2 -3.5 0.9 -1.8 94 91 42 Indonesia 21,888 13,882 11.1 1.4 14.0 10.5 105 101 43 Yemen Arab Rep. 9 1,401 .. . . . . 44 Yemen, FOR 379 825 . . . . .. .. 45 Coted'lvoire 2,703 1,507 6.9 -2.2 8.0 -1.7 91 101 46 Philippines 5,391 6,365 4.2 5.6 3.0 2.3 89 101 47 Morocco 2,172 3,907 6.0 3.6 6.2 2.1 89 85 48 Honduras 746 954 3.6 3.0 3.1 0.5 80 93 49 El Salvador 708 970 2.7 1.8 21 -2.0 70 72 50 PapuaNewGuinea 897 1,114 . . . . . , , 51 Egypt, Arab Rep. 5,286 14,596 3.8 62 -39 153 111 100 52 Nigeria 14,295 10,500 8.8 -6.5 8.7 10.1 111 101 53 Zimbabwe 1,167 1,144 . . .. .. , . 54 Cameroon 2,080 1,239 4.2 2.3 6.3 3.9 73 85 55 Nicaragua 385 826 27 -06 20 -2.9 64 70 56 Thailand 7,413 10,518 6.9 104 4.4 59 77 81 57 Botswanad . . . . 58 Dominicanflep. 868 1,257 10.9 1.6 13.3 -0.9 82 95 59 Peru 3,147 2,212 -2.1 9.3 -2.0 -0.1 85 84 60 Mauritius 373 472 42 4.8 45 -0.7 94 93 61 Congo, People's Rep. 1,265 759 -26 5.6 -0.1 11.9 113 104 62 Ecuador 2,581 1,716 3.4 -3.1 8.5 3.9 105 98 63 Jamaica 745 1,146 3.7 -30 66 -4.6 87 86 64 Guatemala 1,129 1,278 51 3.9 36 -0.5 71 80 65 Turkey 7,134 10,663 .. 11.4 2.8 88 90 Note: For data comparability and coverage, see the technical notes. 196 Merchandise trade Average annual growth rates (percent) Terms of trade (millions of dollars) Exports Imports (1980= 100) Exports Imports 1984 1965-73 1973_84c 1965-73 1973_84c 1982 1984 66 CostaRica 978 1,085 10.3 2.3 8.6 -2.4 89 103 67 Paraguay 381 564 6.6 4.6 4.7 4.2 84 95 68 Tunisia 1,796 3,115 8.6 2.5 7.6 6.4 96 91 69 Colombia 3,483 4,492 5.4 2.8 5.4 9.1 95 97 70 Jordan 755 2,689 5.0 17.6 3.9 11.8 102 95 71 Syrian Arab Rep. 1,853 4,116 1.0 -3.1 89 8.0 110 105 72 Angola 2,029 1,003 12.6 -6.7 8.3 1.2 106 102 73 Cuba .. .. 1.3 3.3 3.6 -06 74 Korea, Oem Rep. . . .. .. 75 Lebanon 582 3,000 14.3 -3.4 5.7 3.3 94 91 76 Mon go//a .. .. . . . . , , Upper middle-income 258,475 t 235,703 t 6.1 w 0.9 w 10.0 w 4.1 w 96 is 97 in 77 Chile 3,650 3,191 -1.4 8.8 2.2 3.0 79 80 78 Brazil 27,005 15,209 10.0 8.1 18.4 -3.4 95 103 79 Portugal 5,208 7,975 2.8 5.2 15.1 2.1 87 98 80 Malaysia 16,407 14,060 8.0 7.5 4.4 8.9 85 93 81 Panama 417 1,423 1.0 -7.1 6.5 -4.6 84 84 82 Uruguay 925 776 -3.0 8.0 29 0.6 85 85 83 Mexico 24,054 11,267 1.0 19.2 5.8 3.2 110 100 84 Korea, Rep. of 29,248 30,609 31.7 151 22.4 9.7 100 100 85 Yugoslavia 10,255 11,996 7.7 4.9 12.3 0.4 109 110 86 Argentina 8,017 4,585 2.3 5.7 5.4 -1.1 89 97 87 South Africa5 17,632 16,364 1.6 7.9 6.5 5.7 87 86 88 Algeria 12,622 10,286 2.9 -0.5 12.1 5.7 113 99 89 Venezuela 13,340 7,594 0.2 -6.1 4.8 2.9 114 99 90 Greece 4,864 9,616 13.4 2.1 9.6 0.7 95 97 91 Israel 5,804 8,289 12.1 7.9 13.0 1.4 93 84 92 Hong Kong 28,317 28,567 11.7 12.9 10.6 9.3 110 109 93 Trinidad and Tobago 2,194 2,101 -1.1 -8.0 2.0 -5.7 98 93 94 Singapore 24,055 28,565 11.0 7.1 9.8 7.1 100 101 95 Iran, Islamic Rep. 13,218 13,250 12.4 -15.9 12.6 3.5 100 93 96 Iraq 11,243 9,980 1.1 -8.3 4.8 15.9 121 107 High-income oil exporters 88,380 t 59,328 t 10.9w -7.8w 10.2w 16.3w 116w 106w 97 Oman 4,413 2,745 . . .. . . . 98 Libya 11,136 8,161 10.1 -8.6 14.2 6.0 108 97 99 SaudiArabia 46,845 33,696 15.0 -6.8 10.4 24.1 128 116 100 Kuwait 11,882 7,696 5.9 -11.3 6.4 11.7 118 107 101 UnitedArabEmirates 14,104 7,030 18.3 -2.6 9.1 11.8 115 105 Industrial market economies 1,999,846 t 1,292,192 t 9.5 w 4.2 w 10.1 w 3.2w 100 in 101 in 102 Spain 23,283 28,607 15.8 .. 7.0 .. 103 Ireland 9,627 9,658 8.4 8.5 7.8 5.1 101 104 104 Italy 73,358 81,971 10.2 4.6 10.7 2.5 95 96 105 NewZealand 5,508 6,181 6.0 4.3 4.0 1.0 98 96 106 United Kingdom 94,306 105,688 5.0 4.2 6.5 3.6 100 99 107 Belgiume 51,416 54,746 10.3 3.1 10.9 2.3 95 94 108 Austria 15,712 19,573 11.2 6.1 106 4.6 100 101 109 Netherlands 65,874 62,136 12.7 2.9 10.3 1.9 102 102 110 France 93,164 103,613 11.4 4.4 11.8 4.3 97 100 111 Japan 170,038 134,257 14.7 7.5 14.9 1.6 103 109 112 Finland 13,498 12,435 7.6 5.1 7.6 1.6 101 102 113 Germany, Fed. Rep. 171,014 152,872 10.7 4.5 11.3 3.9 97 96 114 Denmark 15,486 16,536 6.6 4.8 7.1 1.1 98 99 115 Australia 22,720 22,659 9.3 3.0 6.8 3.4 98 95 116 Sweden 29,258 26,331 7.9 1.3 54 1.1 99 103 117 Canada 84,938 73,230 9.5 4.3 9.4 2.1 95 94 118 Norway 18,914 13,885 8.3 6.4 8.2 3.1 111 117 119 United States 216,008 338,189 6.8 2.3 9.4 3.8 106 112 120 Switzerland 25,724 29,625 6.7 3.4 11.8 4.3 111 106 East European nonmarket economies 180,033t 161 8261 8.0 w 4.9w 7.0w 4.4w 121 Hungary 8,560 8,084 10.3 8.4 10.0 8.0 97 93 122 Poland 11,647 10,547 -0.3 2.6 -1.7 -1.0 97 123 Albania . . . . . . . , . . . . . 124 Bulgaria 12,850 12,715 11.3 11.5 9.3 5.6 . . 125 Czechoslovakia 17,196 17,080 6.9 5.5 6.7 1.6 93 126 German Oem. Rep. 24,890 22,940 9.6 6.5 10.1 3.7 127 Roman/a 13,241 9,836 . . 128 USSR 91,649 80,624 9.8 4.1 9.6 6.7 a. See the technical notes. b. Figures in italics are for 1983, not 1984. c. Figures in italics are for 1973-83. not 1973-84. d. Figures are for the South Afri- can Customs Union comprising South Africa, Namibia, Lesotho, Botswana, and Swaziland. Trade between the component territories is excluded. e. Includes Luxembourg. 197 Table 10. Structure of merchandise exports Percentage share of merchandise exports Fuels, Other Machinery minerals, primary TextiIe and transport Other and metals commodities and clothing equipment manufactures 1965 1983 1965 1983 1965 1983 1965 1983 1965 1983 Low-income economies 12w .. 65w .. 15w 1w 8w China and India 21w .. 24w 18w 6w 32w Other low-income 12w .. 77w .. 5w 5w Sub-Saharan Africa 19 w . . 73 w . . (.) w (.) zv 7w 1Ethiopia (.) 8 100 91 (.) (.) (.) (.) (.) 1 2 Bangladesh .. 4 . . 35 . . 48 .. 2 .. 12 3 Mali 1 .. 96 . 1 . . 1 .. 1 4 Zaire 72 . . 20 .. (.) .. (.) .. 8 5 Burkina Faso 1 (.) 94 89 2 2 1 4 1 4 6 Nepal .. 5 .. 43 . 28 .. 1 .. 23 7 Burma 5 .. 94 (.) .. (.) .. (.) 8 Melawi (.) . . 99 (.) (.) .. 1 9 Niger (.) .. 95 .. 1 . . 1 .. 3 10 Tanzania 1 .. 86 .. (.) . . (.) .. 13 11 Burundi (.) 94 (.) . . (,) . . 5 12 Uganda 13 .. 86 (.) (.) .. 1 13 Togo 33 .. 62 (.) . . 1 .. 4 14 Central African Rep. 1 . . 45 .. (.) .. (.) .. 54 15 India 10 18 41 29 36 14 1 7 12 31 16 Madagascar 4 12 90 81 1 4 1 1 4 2 17 Somalia (.) . . 86 (.) .. 4 .. 10 18 Benin 1 . . 94 (.) . . 2 . . 3 19 Rwanda 40 . . 60 .. (.) .. (.) . . 1 20 China .. 22 .. 21 .. 19 .. 6 .. 32 21 Kenya 13 22 77 65 (.) (.) (.) 2 9 11 22 Sierra Leone 25 29 14 28 (.) (.) (.) (.) 60 42 23 Haiti .. .. .. ., .. .. 24 Guinea .. .. .. .. .. 25 Ghana 13 . 85 . (.) 1 2 26 Sri Lanka 2 10 97 60 (.) 19 (.) 1 1 9 27 Sudan 1 .. 98 . . (.) . . 1 .. (.) 28 Pakistan 2 2 62 34 29 50 1 1 6 13 29 Senegal 9 . . 88 1 .. 1 . . 2 30 Afghanistan (.) . . 87 . . 13 . . 0 . . (.) 31 Bhutan . . .. . . .. .. . . .. .. 32 Chad 5 .. 92 (.) .. (.) .. 3 33 Kampuchea, Dem. (.) .. 99 .. (.) .. (.) .. (.) 34 Lao PDR 62 .. 32 .. (.) .. (.) .. 6 35 Mozambique 14 .. 84 .. 1 . . (.) .. 1 36 VietNam .. .. .. .. .. .. Middle-income economies 36w 31w 48 w 23 w 4w 9w 2w 14w lOw 23w Oil exporters 60w 68w 34w 16w 2w 2w 1 u' 7w 4w 7w Oil importers 19w 12w 57w 26w 6w 13w 4w 17w 14w 32w Sub-Saharan Africa 44w 50w 1w 1w 5w Lower middle-income 27w 46w 66w 33w 2w 7w 1w 2w 5w 12w 37 Mauritania 94 . . 5 . . (.) . . 1 .. (.) 38 Liberia 72 68 25 31 (.) (.) 1 (.) 2 1 39 Zambia 97 .. 3 .. (.) (.) .. (.) 40 Lesothob . . .. . . .. 41 Bolivia 93 .. 3 .. (.) . (.) . . 4 42 Indonesia 43 80 53 12 (.) 1 3 1 1 6 43 Yemen Arab Rep. . . . . . . .. .. .. .. .. 44 Yemen, PDR 79 .. 15 .. 2 .. 2 .. 2 45 CotedIvoire 2 12 93 77 1 3 1 2 3 6 46 Philippines 11 13 84 36 1 7 (.) 5 5 38 47 Morocco 40 37 55 31 1 14 (.) 2 4 16 48 Honduras 6 7 90 84 1 1 (.) (.) 3 7 49 ElSalvador 2 5 81 55 6 15 1 3 10 22 50 PapuaNewGuinea (.) 51 90 40 (.) (.) (.) 2 10 7 51 Egypt, Arab Rep. 8 70 71 22 15 4 (.) (.) 5 5 52 Nigeria 32 . . 65 . . (.) . . 0 . . 2 53 Zimbabwe 45 .. 40 . . 6 .. 1 .. 8 54 Cameroon 17 68 77 27 (.) 1 3 1 2 3 55 Nicaragua 4 1 90 91 (.) (.) (.) (.) 5 7 56 Thailand 11 6 84 62 (.) 11 (.) 6 4 15 57 Botswanab .. .. .. .. 58 Dominican Rep. 10 (.) 88 76 (.) (.) (.) 4 2 19 59 Peru 45 69 54 17 (.) 8 (.) 1 1 5 60 Mauritius (.) (.) 100 69 (.) 23 (.) 1 (.) 7 61 Congo, People's Rep. 4 . . 45 . (.) .. 2 . . 49 62 Ecuador 2 64 96 33 1 (.) (.) 1 2 2 63 Jamaica 28 22 41 18 4 3 (.) 4 27 54 64 Guatemala (.) . . 86 . . 4 . 1 . . 9 65 Turkey 9 9 89 45 1 26 (.) 5 1 16 Note: For data comparability and coverage, see the technical notes. 198 Percentage share of merchandise exports Fuels, Other Machinery minerals, primary Textiles and transport Other and metals commodities and clothing equipment manufactures 1965 1983 1965 1983 1965 1983 1965 1983 1965 1983 66 Costa Rica (.) 1 84 71 2 3 1 4 13 21 67 Paraguay (.) .. 92 () .. (.) .. 8 68 Tunisia 31 48 51 8 2 20 (.) 4 16 20 69 Colombia 18 15 75 66 2 4 (.) 1 4 14 70 Jordan 27 26 54 26 1 3 11 14 6 32 71 Syrian Arab Rep. 1 . . 89 . . 7 . 1 2 72 Angola 6 76 .. () .. 1 . . 17 73 Cuba 4 .. 92 .. (.) .. .. 4 74 Korea, Oem. Rep. . . . . .. . . . . ., .. .. . 75 Lebanon 14 52 .. 2 .. 14 .. 18 76 Mongolia .. .. . . .. .. . . .. .. Upper middle-income 42w 26w 37w 19w 5w lOw 3w 18w 12w 27w 77 Chile 89 . . 7 . . (.) . . 1 . . 4 78 Brazil 9 15 83 44 1 3 2 14 6 23 79 Portugal 4 6 34 18 24 28 3 15 34 32 80 Malaysia 35 35 59 43 (.) 2 2 14 4 6 81 Panama . . 23 . . 64 . . 6 . . (.) . . 7 82 Uruguay (.) (.) 95 70 2 13 (.) 1 3 15 83 Mexico 22 64 62 9 3 1 1 16 13 10 84 Korea, Rep. ot 15 3 25 6 27 25 3 32 29 34 85 Yugoslavia 10 8 33 16 8 9 24 31 25 36 86 Argentina 1 6 93 78 (.) 1 1 3 4 12 87 South Africab 24 14 44 12 1 1 3 3 28 70 88 Algeria 57 99 39 (.) (.) (.) 2 (.) 2 1 89 Venezuela 97 . . 1 . . (.) . . (.) . . 2 90 Greece 8 15 78 35 3 22 2 3 8 24 91 Israel 6 3 28 16 9 6 2 17 54 57 92 HongKong 2 2 11 6 43 33 6 22 37 36 93 Trinidad and Tobago 84 84 9 2 (.) (.) (.) 3 7 11 94 Singapore 21 31 44 13 6 4 10 31 18 22 95 Iran, Islamic Rep, 88 . . 8 .. 4 .. (.) .. 1 96 Iraq 95 . . 4 'S () S ' () . . 1 High-income oil exporters 98 w 95 ii' 1 u' (.) U' (.) ti) (.) w 1 iv 2 zv (.) ii' 2 ii' 97 Oman .. 95 .. 1 . . (.) .. 4 . 1 98 Libya 99 99 1 (.) (.) (.) 1 (.) () 1 99 Saudi Arabia 98 99 1 (.) (.) (.) 1 1 1 (.) 100 Kuwait 98 76 1 2 (.) 1 1 6 (.) 15 101 United Arab Emirates 99 92 1 1 (.) 1 (.) 3 (.) 4 Industrial market economies 9w 12 w 21 w 14 w 7w 4 iv 31 u' 38 u' 32 w 32 w 102 Spain 9 13 51 18 6 5 10 26 24 39 103 Ireland 3 3 63 30 7 6 5 27 22 34 104 Italy 8 7 14 8 15 12 30 32 33 41 105 NewZealand 1 6 94 72 (.) 3 (.) 4 5 15 106 United Kingdom 7 26 10 9 7 3 41 31 35 32 107 Belgiumc 13 13 11 12 12 7 20 22 44 46 108 Austria 8 5 17 10 12 9 20 29 43 46 109 Netherlands 12 26 32 24 9 4 21 16 26 30 110 France 8 7 21 19 10 5 26 35 35 34 111 Japan 2 1 7 2 17 4 31 58 43 35 112 Finland 3 9 40 17 2 5 12 25 43 44 113 Germany, Fed. Rep. 7 6 5 7 5 5 46 46 37 36 114 Denmark 2 6 55 36 4 5 22 25 17 28 115 Australia 13 42 73 35 1 1 5 6 9 16 116 Sweden 9 10 23 12 2 2 35 41 30 34 117 Canada 28 23 35 22 1 1 15 35 21 20 118 Norway 21 62 28 9 2 1 17 14 32 15 119 United States 8 8 27 22 3 2 37 44 26 24 120 Switzerland 3 3 7 4 10 7 30 34 50 52 East European nonmarket economies 121 Hungary 5 12 25 25 9 6 32 30 28 26 122 Poland 26 .. 10 . . 4 . . 41 . . 19 123 Albania 124 Bulgaria 125 Czechoslovakia 52 . . 31 126 German Oem. Rep. 127 Romania 128 USSR a. Figures in italics are for 1982, not 1983. b. Figures are for the South African Customs Union comprising South Africa, Namibia, Lesotho, Botswana, and Swaziland. Trade between the component territories is excluded. c. Includes Luxembourg. 199 Table 11. Structure of merchandise imports Percentage share of merchandise imports Other Machinery primary and transport Other Food Fuels commodities equipment manufactures 1965 1983° 1965 1983° 1965 1983° 1965 1983° 1965 1983° Low-income economies 21w ..w 5w ..w 9w ..w 31w ..w 34w China and India 12w . 16w . . 13w . 18w Other low-income 20 w . to 5w ..w 5w .w 27 w . .w 43 w Sub-Saharan Africa 18w . .w 6w ..w 5w . .w 27w . .w 44 w 1 Ethiopia 6 9 6 25 6 4 37 31 44 31 2 Bangladesh .. 20 .. 11 .. 11 .. 23 . . 36 3 Mali 20 6 .. 5 ,. 23 . . 47 4 Zaire 18 . . 7 . 5 . . 33 37 5 Burkina Faso 23 23 4 17 14 6 19 24 40 30 6 Nepal . . 15 11 . . 4 15 . . 56 7Burma 15 .. 4 5 .. 18 .. 58 8 Malawi 15 . . 5 . . 3 . . 21 .. 57 9 Niger 12 .. 6 . 6 . 21 .. 55 10 Tanzania .. .. . ,. . 11 Burundi 16 . . 6 . . 8 . . 15 55 12 Uganda .. 5 . 23 . 1 42 .. 29 l3Togo 14 .. 4 .. 5 .. 32 45 14 Central African Rep 13 . . 7 . . 2 . . 29 . . 49 15 India 22 7 5 37 14 6 37 17 22 32 16 Madagascar 19 16 5 24 2 3 25 30 48 27 17 Somalia 31 . . 5 . . 8 24 .. 33 18 Benin 18 16 6 5 7 10 17 22 53 47 19 Rwanda 12 . 7 . 5 ,. 28 .. 50 20 China 15 .. 1 ,. 18 .. 19 47 21 Kenya 9 .. 36 . 4 .. 23 .. 28 22 SierraLeone 17 27 9 35 3 2 29 15 41 21 23 Haiti .. 26 .. 12 . 4 .. 21 . 37 24 Guinea . . . . . . . . . . . . . 25 Ghana 12 . . 4 ,. 3 33 . . 48 26 Sri Lanka 41 17 8 24 4 3 12 26 34 31 27 Sudan 23 .. 5 . 4 .. 21 47 28 Pakistan 20 14 3 28 5 6 38 26 34 25 29 Senegal 36 .. 6 .. 4 . . 15 .. 38 30 Afghanistan 17 .. 4 .. 1 .. 8 .. 69 31 Bhutan . . . .. .. .. .. 32 Chad 13 .. 20 . 4 . . 21 .. 42 33 Kampuchea, Oem. 6 .. 7 . 2 .. 26 .. 58 34 Lao POR 27 .. 14 6 . 19 .. 34 35 Mozambique 17 .. 8 7 . . 24 .. 45 36 Viet Nam . . . . . . . . . .. Middle-income economies 16w 11w 8w 20 w lOw 7w 29 w 30 w 38 w 32 w Oil exporters 15w 17w 6w 9w 7w 5w 33 w 37 zv 39 w 32 w Oil importers 16 w 9w 8w 24 w 11w 7w 27 w 27 w 37 w 33 w Sub-Saharan Africa 12 w 20 w 5w 6w 3w 3w 33 w 36 w 47 w 36 w Lower middle-income 17w 14w 7w 18w 6w 5w 29w 30w 41w 33w 37 Mauritania 9 .. 4 1 . . 56 . . 30 38 Liberia 17 25 8 17 3 3 33 26 39 28 39 Zambia 9 9 10 19 3 1 33 34 45 37 40 Lesotho5 .. .. .. . . . . . . . . 41 Bolivia 19 12 1 2 3 1 34 45 42 40 42 Indonesia 6 8 3 25 2 5 39 35 50 28 43 Yemen Arab Rep, . . . . . .. .. . . .. .. 44 Yemen, PDR 19 .. 39 .. 5 .. 10 .. 26 45 CotedIvoire 18 20 6 19 3 3 28 25 46 34 46 Philippines 20 8 10 27 7 5 33 21 30 39 47 Morocco 36 15 5 24 10 8 18 26 31 27 48 Honduras 11 10 6 22 1 2 26 18 56 47 49 El Salvador 15 18 5 25 4 3 28 12 48 42 50 PapuaNewGuinea 23 19 4 19 3 2 25 30 45 30 51 Egypt, Arab Rep. 26 30 7 3 12 6 23 29 31 30 52 Nigeria 9 21 6 3 3 3 34 38 48 35 53 Zimbabwe 7 .. (.) . . 4 .. 41 ,, 47 54 Cameroon 11 9 5 4 4 3 28 35 51 49 55 Nicaragua 12 12 5 23 2 1 30 23 51 40 56 Thailand 6 4 9 24 6 8 31 29 49 35 57 Botswana5 .. .. . . . ., . . . . . . 58 Dominican Rep. 24 14 10 36 4 3 23 17 40 29 59 Peru 17 18 3 2 5 3 41 45 34 32 60 Mauritius 35 25 5 19 3 5 15 12 42 39 61 Congo, PeoplesRep. 15 17 6 15 1 1 34 25 44 42 62 Ecuador 10 5 9 2 4 6 33 43 44 45 63 Jamaica 21 19 9 29 5 4 23 18 42 30 64 Guatemala 11 .. 7 .. 2 .. 29 . . 50 65 Turkey 6 2 10 44 10 8 37 21 37 26 Note: For data comparability and coverage, see the technical notes. 200 Percentage share of merchandise imports Other Machinery primary and transport Other Food Fuels commodities equipment manufactures 1965 1983 1965 1983 1965 1983 1965 1983 1965 1983 66 Costa Rica 9 9 5 20 2 3 29 15 54 53 67 Paraguay 14 13 14 24 2 (.) 37 37 33 26 68 Tunisia 16 15 6 12 7 9 31 29 41 35 69 Colombia 8 10 1 13 10 6 45 39 35 32 70 Jordan 28 17 6 19 6 4 18 23 42 36 71 Syrian Arab Rep. 22 .. 10 .. 9 .. 16 . 43 72 Angola 17 2 .. 3 .. 24 .. 54 73 Cuba 29 . . 10 .. 3 . 15 .. 43 74 Korea, Dem. Rep. .. .. .. .. .. 75 Lebanon 28 .. 9 . 9 .. 17 .. 36 76 Mongolia .. .. . . . .. Uppermiddle-income 15w lOw 8w 21w 12w 7w 29w 30w 36w 32w 77 Chile 20 . 6 . 10 .. 35 .. 30 78 Brazil 20 8 21 56 9 4 22 16 28 16 79 Portugal 16 14 8 27 19 9 27 26 30 24 80 Malaysia 25 9 12 14 10 5 22 44 32 28 81 Panama . . 9 27 1 . 26 . . 37 82 Uruguay 7 7 17 36 16 6 24 25 36 26 83 Mexico 5 17 2 3 10 6 50 45 33 29 84 Korea, Rep. of 15 8 7 27 26 14 13 29 38 22 85 Yugoslavia 16 6 6 27 19 12 28 24 32 30 86 Argentina 6 4 10 10 21 10 25 32 38 43 87 South Africab 5 3 5 (.) 11 4 42 43 37 50 88 Algeria 27 21 (.) 2 6 6 15 35 52 37 89 Venezuela 12 .. 1 . . 5 . . 44 .. 39 90 Greece 15 13 8 27 11 7 35 25 30 28 91 Israel 16 10 6 18 12 5 28 32 38 36 92 Hong Kong 25 12 3 7 13 6 13 21 46 54 93 Trinidad and Tobago 12 17 49 3 2 5 16 37 21 38 94 Singapore 23 7 13 31 19 6 14 30 30 26 95 Iran, Islamic Rep. 16 .. (.) 6 36 . . 42 96 Iraq 24 .. (.) 7 .. 25 .. 44 High-income oil exporters 22w 12w 2w 1w 5w 3w 32 u 43 w 40 zu 41 w 97 Oman .. 14 . . 2 .. 3 .. 46 . . 36 98 Libya 13 . . 4 .. 3 .. 36 .. 43 99 Saudi Arabia 30 12 1 (.) 5 3 27 43 37 42 100 Kuwait 22 13 1 1 7 3 32 44 39 40 101 UnitedArabEmirates .. 9 .. 6 .. 3 . . 41 42 Industrial market economies 19w lOw 11 w 23w 20w 9w 19w 26w 31 w 32w 102 Spain 19 12 10 40 16 10 27 18 28 19 103 Ireland 18 13 8 13 10 5 25 29 39 40 104 Italy 24 14 16 31 24 11 15 18 21 25 105 NewZealand 7 6 7 18 10 5 33 31 43 39 106 United Kingdom 30 12 11 11 25 10 11 30 23 37 107 Belgiumc 14 12 9 18 21 10 24 23 32 38 108 Austria 14 6 7 14 13 8 31 30 35 41 109 Netherlands 15 15 10 25 13 7 25 21 37 33 110 France 19 11 15 24 18 8 20 24 27 33 111 Japan 22 13 20 47 38 17 9 8 11 16 112 Finland 10 6 10 27 12 8 35 29 34 31 113 Germany, Fed. Rep. 22 12 8 21 21 9 13 22 35 36 114 Denmark 14 12 11 20 11 7 25 22 39 39 115 Australia 5 5 8 11 10 4 37 38 41 41 116 Sweden 12 7 11 23 12 7 30 30 36 34 117 Canada 10 7 7 7 9 6 40 51 34 30 118 Norway 10 7 7 10 12 7 38 37 32 40 119 UnitedStates 19 8 10 22 20 7 14 32 36 31 120 Switzerland 16 8 6 11 11 7 24 27 43 47 East European nonmarket economies 121 Hungary 12 7 11 23 22 10 27 27 28 33 122 Poland 10 26 11 .. 25 27 123 Albania .. .. .. . . .. .. 124 Bulgaria .. .. . . .. .. .. .. 125 Czechoslovakia .. 7 .. 30 . 13 .. 32 19 126 German Dem. Rep. .. . .. .. .. .. 127 Romania .. .. .. . . .. .. .. 128 USSR .. .. .. .. .. .. a. Figures in italics are for 1982, not 1983. b. Figures are for the South African Customs Union comprising South Africa, Namibia, Lesotho, Botswana, and Swaziland. Trade between the component territories is excluded. c. Includes Luxembourg. 201 Table 12. Origin and destination of merchandise exports Destination of merchandise exports (percentage of total) Industrial East European market nonmarket High-income Developing economies economies oil exporters economies Origin 1965 1984 1965 1984a 1965 l984 1965 1984a Low-income economies 56 w 50 w 10w 7w 2w 4w 32 w 40 u' China and India 51w 46 w 14w 8w 2w 3w 33 w 44 w Other low-income 62 w 60 w 5w 4w 2w 6w 31 w 30 w Sub-Saharan Africa 72 w 68 w 4w 3w 1 ?L' 3w 22w 25 w 1 Ethiopia 78 79 3 1 6 6 14 15 2 Bangladesh . 51 6 . 2 .. 41 3Mali 7 .. 4 .. 0 .. 89 4 Zaire 93 92 (.) (.) (.) (.) 7 8 5 Burkina Faso 17 35 0 0 0 0 83 65 6 Nepal . 21 (.) .. (.) .. 79 7 Burma 29 30 8 3 1 3 62 64 8 Malawi 69 68 (.) 0 (.) (.) 30 31 9 Niger 61 56 (.) (.) (.) 18 39 26 10 Tanzania 66 61 1 4 1 1 32 35 11 Burundi 24 78 0 4 0 0 76 19 12 Uganda 69 89 2 0 1 2 28 9 13 Togo 92 63 2 5 0 0 6 32 14 Central African Rep. 71 93 0 0 0 0 29 7 15 India 58 59 17 15 2 6 23 20 16 Madagascar 85 72 1 3 (.) (.) 14 25 17 Somalia 40 10 (.) 0 3 64 57 26 18 Benin 88 80 (.) 0 0 0 12 20 19 Rwanda 96 81 0 0 0 (.) 4 19 20 China 47 41 12 5 2 1 40 52 21 Kenya 69 51 2 1 1 1 28 47 22 Sierra Leone 92 71 (.) 0 (.) 0 8 29 23 Haiti 97 96 (.) (.) 0 0 3 4 24 Guinea .. 89 .. 0 .. (.) . . 10 25 Ghana 74 57 18 25 (.) (.) 9 17 26 Sri Lanka 56 45 9 6 3 6 33 43 27 Sudan 56 40 13 8 4 17 27 35 28 Pakistan 48 47 3 5 4 17 45 31 29 Senegal 92 53 (.) (.) 0 (.) 7 47 30 Afghan/stan 47 .. 27 . . 0 .. 25 31 Bhutan .. .. . . .. . 32Chad 64 .. 0 .. 2 .. 34 33 Kampuchea, Dem. 36 . . 6 .. 0 .. 58 34 Lao PDR 9 .. 0 . . 0 .. 91 35 Mozambique 24 .. (.) . . (.) .. 76 36 VietNam .. .. .. .. Middle-income economies 69 w 64 w 7w 3w 1w 2w 23 w 31 w Oil exporters 70 w 71w 5w (.)w 1w (.) a 24 w 28 w Oil importers 68 w 58 w 8w 5w 1w 3a 23 w 33 w Sub-Saharan Africa 81w 75 w 2w (.) a (.)w (.) a' 17w 24 w Lower middle-income 69w 69w 9w 2w 1w 2w 20w 27w 37 Mauritania 96 96 (.) (.) 0 (.) 4 4 38 Liberia 98 77 0 (.) 0 (.) 2 23 39 Zambia 87 68 2 2 0 (.) 11 30 40 Lesothob .. .. .. . . 41 Bolivia 97 45 0 2 0 (.) 3 53 42 Indonesia 72 73 5 1 (.) 1 23 26 43 Yemen Arab Rep. .. 34 .. (.) .. 15 . . 52 44 Yemen, FOR 38 51 (.) (.) 1 1 61 48 45 CotedIvoire 84 70 2 3 1 (.) 13 27 46 Philippines 95 78 0 2 (.) 1 5 18 47 Morocco 80 66 7 6 (.) 3 12 25 48 Honduras 80 81 0 2 0 2 20 15 49 El Salvador 73 . . 1 .. 0 .. 26 50 Papua New Guinea 98 87 0 1 0 (.) 2 12 51 Egypt, Arab Rep. 28 78 44 4 1 3 27 15 52 Nigeria 91 73 3 (.) (.) (.) 6 27 53 Zimbabwe 50 .. 1 .. (.) . . 48 54 Cameroon 93 78 (.) (.) (.) (.) 7 22 55 Nicaragua 81 .. (.) .. 0 . . 19 56 Thailand 44 56 1 1 2 5 53 38 57 Botswanab .. .. .. 58 Dominican Rep. 99 91 0 3 0 0 1 5 59 Peru 86 72 3 2 (.) (.) 12 26 60 Mauritius 94 95 0 (.) 0 (.) 6 5 61 Congo, People's Rep. 86 96 1 (.) 0 (.) 13 3 62 Ecuador 89 67 (.) (.) 0 (.) 11 33 63 Jamaica 93 81 1 1 (.) 0 6 18 64 Guatemala 75 59 0 2 (.) 1 25 38 65 Turkey 71 51 15 4 (.) 9 14 36 Note: For data comparability and coverage, see the technical notes. 202 Destination of merchandise exports (percentage of total) Industrial East European market nonmarket High-income Developing economies economies oil exporters economies Origin 1965 1984 1965 1984 1965 1984 1965 1984 66 Costa Rica 79 71 (.) 3 0 1 20 25 67 Paraguay 58 47 0 0 0 0 42 53 68 Tunisia 61 81 5 1 3 4 31 15 69 Colombia 86 81 2 2 (.) () 12 17 70 Jordan 20 12 4 6 22 22 54 60 71 SyrianArabRep. 26 41 24 13 8 3 42 42 72 Angola 55 1 () 45 73 Cuba 14 . . 62 . . (.) 24 74 Korea, Bern. Rep. . . . . 75 Lebanon 43 . 4 . . 35 . . 18 76 Mongolia Upper middle-income 69 w 62w 6 ii' 4 iv (.) w 2w 25 iv 32 w 77 Chile 90 75 () 1 0 2 10 22 78 Brazil 77 62 6 7 () 2 18 29 79 Portugal 65 83 1 2 (.) 1 34 15 80 Malaysia 56 52 7 0 (.) 1 36 47 81 Panama . 69 . (.) () . 31 82 Uruguay 76 34 5 8 0 3 19 55 83 Mexico 82 92 6 0 (.) (.) 13 8 84 Korea, Rep. of 75 69 0 0 (.) 6 25 25 85 Yugoslavia 40 35 42 46 (.) 3 17 17 86 Argentina 67 39 8 22 (.) 1 26 38 87 South Africab 96 43 0 (.) (.) (.) 4 57 88 Algeria 90 92 1 () () 0 8 8 89 Venezuela 63 66 (.) (.) (.) 0 37 34 90 Greece 64 68 23 6 2 8 12 18 91 Israel 72 70 4 1 0 0 24 29 92 HongKong 67 60 () (.) 1 2 32 38 93 Trinidad and Tobago 92 74 0 0 0 (.) 8 26 94 Singapore 28 45 6 2 2 6 64 48 95 Iran, Islamic Rep. 67 . 3 . . 2 . . 28 96 Iraq 83 1 .. (.) . 16 High-income oil exporters 70 w 59w (.) iv (.) iv 3 iv 3 iv 27 iv 33 iv 97 Oman . . 63 , (.) . . 0 . . 36 98 Libya 97 74 (.) 2 (.) 0 3 24 99 Saudi Arabia 71 59 0 0 8 3 21 37 100 Kuwait 56 40 () 1 1 6 44 53 101 UnitedArabEmirates 69 79 0 (.) 5 3 26 18 Industrial market economies 71 iv 70 w 3 iv 3 iv 1 iv 3 iv 26 iv 24 iv 102 Spain 73 64 3 3 (.) 4 24 29 103 Ireland 91 89 1 1 () 2 8 9 104 Italy 71 68 5 3 2 7 23 21 105 NewZealand 88 64 1 2 () 2 11 32 106 United Kingdom 63 75 2 2 2 5 33 18 107 Belgiumc 86 83 1 2 (.) 2 12 13 108 Austria 71 71 15 12 () 3 13 14 109 Netherlands 83 84 2 1 1 2 14 12 110 France 68 69 3 3 (.) 4 28 24 111 Japan 49 55 3 2 2 6 47 37 112 Finland 71 68 21 21 () 1 9 11 113 Germany, Fed, Rep. 77 76 3 4 1 3 19 17 114 Denmark 85 80 4 2 1 2 11 17 115 Australia 69 52 4 4 1 3 26 41 116 Sweden 85 82 4 3 LI 2 11 13 117 Canada 87 88 3 2 () 1 10 10 118 Norway 82 90 4 1 (.) () 13 9 119 United Slates 61 59 1 2 1 3 37 36 120 Switzerland 76 74 3 3 1 4 20 19 East European nonmarket economies 32w .. 51w 3iv 14o' 121 Hungary 22 28 66 48 (.) 2 12 21 122 Poland . . 34 48 . . 2 . . 16 123 Albania . . . . . . . . 124 Bulgaria .. 11 . . 69 . . 8 . 12 125 Czechoslovakia 18 15 72 68 1 2 9 15 126 German Oem. Rep. .. . . . 127 Romania . . 25 45 . . 2 .. 29 128 USSR 39 . 46 3 12 a. Figures in italics are for 1983, notl 984 b. Figures are for the South African Customs Union comprising South Africa, Namibia, Lesotho, Botswana, and Swaziland, Trade between the component territories is excluded. c. Includes Luxembourg 203 Table 13. Origin and destination of manufactured exports Destination of manufactured exports (percentage of total) Manufactured Industrial East European exports market nonmarket High-income Developing (millions economies economies oilexporters economies of dollars) Origin 1965 1983° 1965 1983° 1965 1983° 1965 1983° 1965 1983° Low-income economies 56w 8w 2w 34 w China and India Other low-income 58w 1w 2w 39 w Sub-Saharan Africa 77w 1w (.)w 22 w 1 Ethiopia 67 76 (.) 9 20 2 13 13 (.) 3 2 Bangladesh 48 6 .. 1 45 485 3 Mali 14 8 0 78 (.) 4 Zaire 93 (.) (.) 7 28 5 Burkina Faso 2 34 0 0 0 0 98 66 1 6 6 Nepal 36 .. 3 (.) 61 45 7 Burma 73 1 (.) 26 1 8 Malawi 3 .. 0 0 97 () 9 Niger 43 (.) 0 57 1 10 Tanzania 93 (.) S () 7 23 11 Burundi (.) 0 0 100 1 12 Uganda 7 (.) .. 0 .. 93 1 l3Togo 37 .. () .. 0 62 1 14 CentralAfricanRep 60 0 0 40 14 15 India 55 51 12 0 2 7 31 19 828 5080 16 Madagascar 80 80 0 (.) 0 (.) 20 20 5 24 17 Somalia 21 (.) 2 77 4 18 Benin 15 8 0 0 0 0 85 92 1 20 19 Rwanda 95 0 .. 0 .. 5 .. (.) 20 China .. 12579 21 Kenya 23 8 2 (.) 2 3 73 89 13 128 22 Sierra Leone 99 99 (.) 0 (.) 0 1 1 53 29 23 Haiti S .. 24 Guinea S 25 Ghana 60 10 (.) 29 7 26 Sri Lanka 59 87 7 (.) (.) 1 34 13 5 314 27 Sudan 79 (.) 2 20 2 12 28 Pakistan 40 41 1 5 3 21 57 33 190 1,964 29 Senegal 48 1 0 52 4 30 Afghanistan 98 .. (.) 0 2 11 31 Bhutan .. 32 Chad 6 0 25 69 1 33 Kampuchea, Dem. 28 1 .. 0 71 1 34 Lao POR 13 0 0 87 () 35 Mozambique 27 .. () (.) 73 3 36 VietNam .. Middle-income economies 52w 54w 9w 4w 2w Sw 37w 38w Oil exporters 45 w 75 a' 9w 1w 3w 2w 43 w 23 a' Oil importers 54 w 51 a' 9w 4w 1w Sw 36w 40w Sub-Saharan Africa 29w (5) ii' (.)w 71w Lower middle-income 37w 56w lOw 1w 4w 5w 49w 37w 37 Mauritania 61 0 0 39 1 38 Liberia 77 54 0 (.) 0 (.) 23 46 4 6 39 Zambia 14 0 0 86 1 8 40 Lesotho S 41 Bolivia 86 0 0 14 . . 6 42 Indonesia 25 42 1 (.) (,) 7 74 52 27 1618 43 Yemen Arab Rep. . . . 44 Yemen, PDR 32 . (.) .. 6 .. 62 11 45 Coted'lvoire 50 31 () (.) (.) (.) 50 69 15 235 46 Philippines 93 77 0 (.) (,) 2 7 21 43 2534 47 Morocco 63 56 2 3 (,) 3 35 37 23 707 48 Honduras 2 28 0 0 0 0 98 72 6 58 49 El Salvador 1 8 0 0 0 (.) 99 92 32 162 50 Papua New Guinea 100 85 0 0 0 0 (.) 15 5 72 51 EgyptArabRep 20 38 46 40 4 8 30 14 126 256 52 Nigeria 85 . . (.) (.) 15 17 53 Zimbabwe 12 . . (.) . . (.) 88 . . 116 54 Cameroon 46 39 0 0 (.) (,) 54 61 6 78 55 Nicaragua 4 3 0 (.) 0 0 96 97 8 30 56 Thailand 39 60 (.) (.) (.) 9 61 31 30 2,058 57 Botswana .. .. .. 58 Dominican Rep 95 87 0 0 0 (.) 5 13 3 155 59 Peru 51 . (5) 0 .. 49 .. 5 60 Mauritius 16 89 0 (.) 0 (.) 84 10 (.) 115 61 Congo, People's Rep. 88 . . 0 .. 0 . . 12 .. 24 62 Ecuador 25 7 0 (.) 0 0 75 93 3 69 63 Jamaica 93 74 1 2 0 0 6 24 64 444 64 Guatemala 9 .. 0 .. 0 .. 91 . 26 65 Turkey 83 50 8 1 (.) 8 9 41 11 2,643 Note: For data comparability and coverage, see the technical notes, 204 Destination of manufactured exports (percentage of total) Manufactured Industrial East European exports market nonmarket High-income Developing (millions economies economies oil exporters economies of dollars) Origin 1965 1983 1965 1983k 1965 1983 1965 1983 1965 1983 66 Costa Rica 6 15 (.) (.) 0 (.) 94 85 18 248 67 Paraguay 93 0 0 .. 7 5 68 Tunisia 19 74 3 1 5 4 73 21 23 816 69 Colombia 43 50 0 1 (.) (.) 57 49 35 595 70 Jordan 49 17 (.) 1 23 28 28 53 5 267 71 SyrianArabRep. 5 21 25 50 16 72 Angola 3 .. 1 (.) .. 96 36 73 Cuba 27 .. 70 ., 0 3 27 74 Korea, Dem. Rep .. .. 75 Lebanon 19 1 .. 61 19 .. 29 76 Mongolia Upper middle-income 56 iv 53 iv 9 iv 4 ii' 1 iv 5w 34 iv 38 iv 77 Chile 38 (.) ,. 0 62 28 323 78 Brazil 40 52 1 1 (.) 3 59 43 134 9,098 79 Portugal 59 85 (.) 1 (.) 1 41 13 355 3464 80 Malaysia 17 63 (.) 0 2 1 81 35 75 3,965 81 Panama .. 39 82 Uruguay 71 52 6 7 0 (.) 23 41 10 298 83 Mexico 71 90 (.) 0 (.) (.) 29 9 165 4,022 84 Korea,Rep.of 68 66 0 0 () 10 32 24 104 22,240 85 Yugoslavia 24 26 52 50 1 4 24 20 617 7,541 86 Argentina 45 52 3 5 (.) 1 52 42 84 1,283 87 SouthAfrica 94 0 0 0 (.) 0 6 100 443 13,081 88 Algeria 50 70 1 6 1 (.) 48 24 24 82 89 Venezuela 59 (.) (.) 41 51 90 Greece 56 60 8 5 9 15 27 20 44 2,194 91 Israel 67 69 4 (.) 0 0 29 31 281 4,122 92 Hong Kong 71 64 (.) (.) 1 4 28 32 995 20,089 93 Trinidad and Tobago 78 79 0 0 0 (.) 22 21 28 330 94 Singapore 9 48 (.) 1 3 6 88 44 338 12,388 95 Iran, Islamic Rep. 61 1 17 21 58 96 Iraq 24 .. 1 16 60 8 High-income oil exporters 30 u' (.) iv 21 iv 49 iv 97 Oman 98 Libya 57 (.) (.) .. 43 7 99 Saudi Arabia 31 10 0 (.) 18 16 52 73 19 824 100 Kuwait 18 38 (,) (.) 33 20 49 42 17 2,448 101 United Arab Emirates 0 Industrial market economies 67 iv 66 iv 3 iv 3 iv 1 iv 5 iv 29 iv 26 iv 102 Spain 57 58 1 2 (.) 6 42 34 382 13,755 103 Ireland 82 92 (.) (,) (.) 1 17 7 203 5,737 104 Italy 68 66 5 4 2 9 25 22 5,587 61,998 105 NewZealarid 90 71 (.) (.) (.) 2 10 28 53 1,153 106 United Kingdom 61 65 2 2 2 8 35 25 11,346 60,350 107 Belgium 86 82 1 2 1 2 13 13 4,823 38,676 108 Austria 67 70 18 12 (.) 3 15 15 1,204 13,070 109 Netherlands 81 82 2 2 1 3 16 13 3,586 32,645 110 France 64 65 3 3 1 4 33 28 7,139 67,189 111 Japan 47 51 2 2 2 8 49 39 7,704 142,050 112 Finland 63 56 26 33 (.) 2 11 9 815 9,334 113 Germany, Fed Rep. 76 73 3 5 1 4 20 19 15,764 147,003 114 Denmark 79 75 4 2 (.) 3 16 19 967 8,922 115 Australia 57 40 (.) 1 (.) 1 43 58 432 4,605 116 Sweden 82 79 4 2 (.) 4 14 14 2,685 21,236 117 Canada 88 92 (.) (,) (.) 1 12 7 2,973 39,917 118 Norway 78 76 3 2 () 1 19 21 734 5,311 119 UnitedStates 58 58 (.) 1 1 6 40 36 17,833 140,035 120 Switzerland 75 71 3 3 1 5 21 21 2,646 23358 East European nonmarket economies 121 Hungary 11 21 74 56 (.) 2 15 21 1,053 5,440 122 Poland . . 16 .. 51 .. 2 . . 31 .. 7,472 123 Albania . . .. .. . . . .. 124 Bulgaria . . . . . . . . . 125 Czechoslovakia . 12 . . 71 . . 2 . 15 14,641 126 German Oem, Rep. 127 Romania 128 USSR a. Figures in italics are for 1983, not 1984. b. Figures are for the South African Customs Union comprising South Africa, Namibia, Lesotho, Botswana, and Swaziland. Trade between the component territories is excluded. c Includes Luxembourg. 205 Table 14. Balance of payments and reserves Gross international reserves Receipts Current account of workers' Net direct In months balance remittances private investment Millions of of import (millions of dollars) (millions of dollars) (millions of dollars) dollars coverage 1970 1984 1970 1984 1970 1984a 1970 1984e 1984 Low-income economies 5.8 w China and India 7.9 w Other low-income 2.1 w Sub-Saharan Africa 1.9 1 Ethiopia -32 -201 . . . . 4 .. 72 109 1.1 2 Bangladesh .. -521 437 . . -1 .. 406 1.7 3 Mali -2 -125 6 32 . 4 1 32 0.9 4 Zaire -64 -310 2 .. 42 138 189 269 1.5 5 BurkinaFaso 9 -67 18 .. (,) .. 36 110 6 Nepal .. -102 .. . . . . . . 94 129 2.9 7 Burma -63 -237 .. ,. ,, 98 140 2.2 8 Malawi -35 -20 .. . . 9 3 29 61 1.9 9 Niger 0 -47 .. .. 1 . . 19 92 10 Tanzania -36 -354 .. -- . . 65 27 03 11 Burundi . 66 - - . . , . 1 15 25 12 Uganda 20 .. .. . . 4 , , 57 13 Toga 3 16 .. 6 1 0 35 178 4.4 14 Central African Rep, -12 -31 -. .. 1 5 1 56 2.8 15 India -394 -2,429 113 2,659 6 . 1023 8,536 5.6 16 Madagascar 10 -176 .. . . 10 37 59 11 17 Somalia -6 -146 .. 22 5 -1 21 7 0.1 18 Benin -1 -30 2 .. 7 .. 16 6 19 Rwanda 7 -42 1 1 (.) 15 8 107 3.9 20 China . . 2,509 . - 317 . . 1,124 . 21,281 9.6 21 Kenya -49 -135 .. .. 14 54 220 414 2.6 22 SierraLeone -16 -33 .. ,. 8 2 39 16 1.0 23 Haiti 2 -110 17 89 3 4 4 18 0.4 24 Guinea . . -19 . . . . . . . . , , . . - 25 Ghana -68 -61 .. 5 68 2 43 437 6.4 26 Sri Lanka -59 9 3 301 (.) 33 43 530 2.8 27 Sudan -42 25 284 . . 9 22 17 0.2 28 Pakistan -667 -1,118 86 2,567 23 62 194 1,610 2.4 29 Senegal -16 -274 3 . . 5 . . 22 13 30 Afghanistan . . .. .. .. .. . . 49 526 31 Bhutan 32 Chad 10 48 26 33 Kampuchea, Dem. 34 Lao PDR 6 35 Mozambique 36 VietNam 243 Middle-income economies 2.9 w Oil exporters 3.4 ii' Oil importes 2.7 w Sub-Saharan Africa 1.4 u' Lower middle-income 2.2 ii' 37 Mauritania -5 -196 1 1 1 1 3 110 2.1 38 Liberia . . -75 . - . . . . 39 , , 3 0.1 39 Zambia 108 -138 .. - - -297 -. 515 55 0.6 40 Lesotho . . 31 . . - - -. 3 . . 49 1.2 41 Bolivia 4 -178 . . 1 -76 7 46 533 5.8 42 Indonesia -310 -2,113 .. . . 83 227 160 5,730 2.8 43 YemenArab Rep. ,. -305 .. 1,012 . . 7 321 2.3 44 Yemen, PDR -4 -368 60 494 ,, .. 59 262 3.0 45 Cofed'lvoire -38 -190 .. . . 31 .. 119 19 0.1 46 Philippines -48 1,241 .. 59 -29 6 255 844 1.0 47 Morocco -124 -986 63 872 20 47 141 266 06 48 Honduras -64 -243 .. 8 7 20 133 1.3 49 El Salvador 9 -65 .. 48 4 28 64 339 3.3 50 PapuaNewGuinea .. -325 .. , , . . 114 . 443 35 51 Egypt, ArabRep. -148 -1,978 29 3,963 . . 713 165 1,486 1.3 52 Nigeria -368 346 . . . 205 189 223 1,674 17 53 Zimbabwe . . -97 - - . . . . -2 59 260 2.0 54 Cameroon -30 -292 - - 26 16 207 81 63 03 55 Nicaragua -40 -444 .. .. 15 8 49 230 2.8 56 Thailand -250 -2,105 . .. 43 409 912 2,688 25 57 Botswana 59 47 , , 474 63 58 DominicanRep. -102 -421 25 195 72 48 32 201 1.3 59 Peru 202 -253 .. .. -70 -88 339 2,061 5.6 60 Mauntius 8 -54 . - - 2 5 46 35 0.7 61 Congo, People's Rep. . - -400 . . . . - 56 9 12 0.1 62 Ecuador -113 -248 .. 89 50 76 739 27 63 Jamaica -153 -309 29 -. 161 .. 139 97 0.6 64 Guatemala -8 -382 .. . . 29 38 79 435 3.1 65 Turkey -44 -1,409 273 1,820 58 113 440 2,443 2.2 Note: For data comparability and coverage, see the technical notes. 206 Gross international reserves Receipts Current account of workers' Net direct In months balance remittances private investment Millions of of import (millions of dollars) (millions of dollars) (millions of dollars) dollars coverage 1970 1984k 1970 1964 1970 1984a 1970 1984 1984 66 Costa Rica -74 -216 26 54 16 412 30 67 Paraguay -16 -313 (.) 4 5 18 677 66 68 Tunisia -53 -734 29 317 16 115 60 464 1.4 69 Colombia -293 -1237 6 79 39 411 207 1785 32 70 Jordan -20 -269 1,236 . . 71 258 842 2.6 71 Syrian Arab Rep. -69 -852 7 327 . . 57 257 0.6 72 Angola . . .. .. . .. .. .. 73Cuba .. .. .. ., .. .. 74 Korea, Dem. Rep. ,. .. .. .. .. .. 75 Lebanon .. ,. , , . . . 405 3,515 76 Mongolia , . . . .. , , ,, . . Upper middle-income 3.3 w 77 Chile -91 -2,060 . . . , -79 67 392 2,774 48 78 Brazil -837 53 4 407 1,555 1,190 11,961 4.7 79 Portugal . , -502 ,. 2,157 . . 186 1,565 6,774 8.3 80 Malaysia 8 -1,597 .. .. 94 912 667 4,441 2.6 81 Panama -64 -70 . . ,. 33 37 16 216 0.4 82 Uruguay -45 -124 .. . . . . 3 186 942 7.5 83 Mexico -1,068 3,905 .. . . 323 392 756 8,019 33 84 Korea, Rep. of -623 -1,344 . . 66 75 610 2,849 1.0 85 Yugoslavia -372 656 441 3,427 . . . . 143 1,732 12 86 Argentina -163 -2,542 ,. . . 11 269 682 2,591 25 87 SouthAfrica -1,215 -1,098 . . , , 318 15 1,057 2,511 1.4 88 Algeria -125 75 211 329 45 -14 352 3,185 2.8 89 Venezuela -104 5,298 .. . -23 42 1,047 12,434 11.1 90 Greece -422 -2,123 333 899 50 486 318 2,220 24 91 Israel -562 -1,499 . . . . 40 8 452 3,374 26 92 Hong Kong . 93 TrinidadandTobago -109 -552 3 1 83 299 43 1,373 5.2 94 Singapore -572 -1,000 . . .. 93 1,458 1,012 10,416 3.8 95 Iran, Islamic Rep. -507 . . . . . . 25 . 217 96 Iraq 105 . . . . 24 472 High-income oil exporters 4.4w 97 Oman 148 43 . . 157 13 989 3.1 98 Libya 645 -1,803 139 -327 1,596 4,759 53 99 Saudi Arabia 71 -24,036 20 5.228 670 26,165 4.3 100 Kuwait 5,570 -125 209 5,373 5.4 101 United Arab Emirates 7,137 2,539 4.1 Industrial market economies 111' 102 Spain 79 2,323 469 844 179 1,524 1,851 16,465 5.5 103 Ireland -198 -916 . . . 32 120 698 2,463 2.3 104 Italy 902 -2,902 446 1,116 498 -694 5,547 41,351 4.8 105 NewZealand -232 -1,444 40 301 137 97 258 1.794 2.4 106 United Kingdom 1,910 1,417 . . . . -185 -5,507 2,919 15,307 1.0 107 Belgium 717 205 154 358 140 106 2.947 15,102 2.4 108 Austria -75 -633 13 175 104 68 1,806 10,760 4.7 109 Netherlands -483 4,879 . . . -15 -2,096 3,362 22,784 3.5 110 France -204 -820 130 342 248 275 5,199 46,174 3.8 111 Japan 1,980 35,148 .. . -260 -5,955 4,877 33,899 23 112 Finland -239 1 . . . . -41 -359 455 3,146 2.3 113 Germany, Fed. Rep. 850 6.130 .. .. -290 -1,907 13,879 69,486 4.3 114 Denmark -544 -1,634 . . , 75 -86 488 3,511 1.7 115 Australia -837 -8,302 785 -1,442 1,709 9,886 33 116 Sweden -265 356 . . . . -104 -885 775 5,716 1.9 117 Canada 821 1.974 566 -1,334 4,733 8,700 10 118 Norway -242 3,228 9 32 -702 813 9,730 4.8 119 UnitedStates 2,320 -107,780 -6,130 17,948 15,237 104,856 2.7 120 Switzerland 72 4,019 70 -362 5,317 40,971 9.9 East European nonmarket economies 121 Hungary -25 290 .. . . . . .. . . 2,745 3.2 122 Poland .. . .. .. . . 123 Albania , . . . . . , , . . . . 124 Bulgaria . . . . . . . , , , . . . . . 125 Czechoslovakia . . .. .. , . .. .. . 126 German Oem. Rep 127 Romania 1,719 1,859 1.9 128 USSR a. Figures in italics are for 1983, not 1984. 207 Table 15. Gross external liabilities Long-term debt (millions of dollars) Use of IMF credit Total gross external Public and Private (millions of Short-term debt liabilities publicly guaranteed nonguaranteed dollars) (millions of dollars) (millions of dollars) 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 Low-income economies China and India Other low-income Sub-Saharan Africa 1 Ethiopia 169 1,384 0 0 0 75 67 1,526 2 Bangladesh .. 5,154 0 356 133 .. 5644 3 Mali 238 960 0 0 9 64 .. 60 1,084 4 Zaire 311 4,084 .. 0 579 .. 244 5 Burkina Faso 21 407 0 0 0 0 .. 26 .. 433 6 Nepal 3 427 0 0 0 4 .. 24 454 7 Burma 101 2,219 0 0 17 77 .. 15 .. 2,311 8 Malawi 122 731 0 0 0 113 .. 42 885 9 Niger 32 678 162 0 44 .. 61 945 10 Tanzania 250 2,594 15 61 0 24 .. 554 .. 3,232 11 Burundi 7 334 0 0 8 0 12 346 12 Uganda 138 675 0 0 0 315 26 .. 1,016 13 Togo 40 659 0 0 0 49 63 772 14 Central African Rep. 24 224 0 0 0 24 .. 12 .. 260 15 India 7,940 22,403 100 2,611 10 3,921 1,743 30,678 16 Madagascar 93 1,636 0 0 0 148 83 .. 1,867 17 Somalia 77 1,233 0 0 0 102 .. 49 .. 1,384 18 Benin 41 582 0 0 0 0 62 644 19 Rwanda 2 244 0 0 3 0 .. 37 281 20 China .. .. .. 5,546 21 Kenya 319 2,633 88 428 0 380 .. 369 .. 3,811 22 Sierra Leone 59 342 0 0 0 74 .. 30 .. 446 23 Haiti 40 494 0 0 2 84 .. 80 658 24 Guinea 312 1,168 0 0 4 11 .. 54 1234 25 Ghana 495 1,122 .. 46 468 208 26 Sri Lanka 317 2,420 .. 44 79 322 .. 301 .. 3,087 27 Sudan 307 5,659 0 0 31 598 404 .. 6,661 28 Pakistan 3,060 9,953 5 26 45 1,241 .. 436 . 11,656 29 Senegal 100 1,555 31 10 0 201 .. 260 .. 2,026 30 Afghanistan . . . . S . . .. 7 .. 31 Bhutan .. .. . . . . . 2 32 Chad 32 109 0 0 3 4 .. 1 114 33 Kampuchea, Oem. . . . . .. .. .. 34 Lao POR . . .. .. .. .. 7 35 Mozambique . . .. .. .. .. .. 116 36 VietNam .. .. . . .. 97 Middle-income economies Oil exporters Oil importers Sub-Saharan Africa Lower middle-income 37 Mauritania 27- 1,171 0 0 0 30 . . 83 .. 1,283 38 Liberia 159 757 0 0 4 208 .. 42 .. 1,007 39 Zambia 623 2,779 30 23 0 698 388 .. 3,888 40 Lesotho 8 134 0 0 0 0 .. 4 .. 138 41 Bolivia 481 3,204 11 340 6 64 . . 306 .. 3,913 42 Indonesia 2,443 22,883 461 3,800 139 413 .. 5,384 .. 32480 43 YemenArabRep. . . 1,688 0 0 0 10 .. 259 . . 1,957 44 Yemen, PDR 1 1,252 0 0 0 15 . 70 .. 1,337 45 Coted'lvoire 256 4,835 11 1,350 0 591 . 630 .. 7,406 46 Philippines 574 11,176 919 2,959 69 757 9,492 .. 24,383 47 Morocco 711 10,169 . . 28 991 1,185 48 Honduras 95 1,841 19 162 0 136 .. 169 . 2,308 49 ElSalvador 88 1,388 88 114 7 105 .. 102 .. 1,709 50 Papua New Guinea 36 925 173 890 0 16 .. 145 . . 1,977 51 Egypt, Arab Rep. 1,750 15,808 . 550 49 48 .. 6,800 . 23,206 52 Nigeria 480 11,815 115 895 0 0 7,032 .. 19,742 53 Zimbabwe 233 1,446 .. 78 0 256 .. 344 .. 2,124 54 Cameroon 131 1,738 9 609 0 0 381 .. 2,728 55 Nicaragua 147 3,835 0 0 8 9 .. 856 .. 4,700 56 Thailand 324 7,568 402 3,368 0 791 . . 3,551 .. 15,278 57 Botswana 15 276 0 0 0 0 .. 5 . . 281 58 Dominican Rep. 226 2,388 141 156 7 221 .. 291 .. 3,057 59 Peru 856 9,825 1,799 1,465 10 675 .. 1,200 .. 13,164 60 Mauritius 32 354 .. 13 0 154 .. 39 .. 560 61 Congo, People's Rep. 144 1,396 0 0 0 0 .. 177 . . 1,573 62 Ecuador 193 6,630 49 177 14 238 .. 1,283 .. 8,329 63 Jamaica 160 2,175 822 80 0 629 .. 224 .. 3,107 64 Guatemala 106 1,514 14 105 0 150 .. 191 .. 1,960 65 Turkey 1,854 15,774 42 425 74 1,426 .. 4,642 .. 22,267 Note: For data comparability and coverage, see the technical notes. 208 Long-term debt (millions of dollars) Use of IMF credit Total gross external Public and Private (millions of Short-term debt liabilities publicly guaranteed nonguaranteed dollars) (millions of dollarsl (millions of dollars) 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 66 Costa Rica 134 3380 112 317 0 156 . . 269 4,122 67 Paraguay 112 1,287 110 0 0 . 98 1,495 68 Tunisia 541 3,707 193 13 0 .. 401 4,301 69 Colombia 1,299 7,980 283 1,437 55 0 . . 2,868 12,285 70 Jordan 119 2,336 0 0 0 0 .. 860 3,196 71 Syrian Arab Rep. 232 2,453 0 0 10 0 622 3,075 72 Angola 173 73 Cuba 607 74 Korea, Bern, Rep. 167 75 Lebanon 64 179 260 439 76 Mongolia Upper middle-income 77 Chile 2,067 10,839 501 6,427 2 779 1,914 19,959 78 Brazil 3,234 66,502 1,706 20,511 0 4,185 13,186 104,384 79 Portugal 485 10,583 85 570 0 561 3,299 15,012 80 Malaysia 390 11,846 0 258 81 Panama 194 3,091 0 0 0 271 912 4,274 82 Uruguay 269 2,545 29 129 18 222 392 3,288 83 Mexico 3,196 69,007 2,770 18,500 0 2,360 7,440 97,307 84 Korea, Rep. of 1,797 24,642 175 5.348 0 1,567 11,500 43,057 85 Yugoslavia 1,199 8,690 854 8,370 0 1,947 837 19,844 86 Argentina 1,878 28,671 3,291 9,500 0 1,098 6,570 45,839 87 South Africa 12,246 88 Algeria 937 12,052 0 0 0 0 1,759 13,811 89 Venezuela 728 17,247 236 6.500 0 0 10,500 34,247 90 Greece 905 9,456 388 1,647 0 0 3,267 14,369 91 Israel 2,274 15,415 361 4,453 13 0 3,581 23,449 92 Hong Kong 2 270 . . 0 0 860 93 Trinidad and Tobago 101 941 0 0 0 0 159 1,100 94 Singapore 152 1,911 .. . . 0 0 208 95 Iran, Islamic Rep. 96 Iraq 1,858 High-income oil exporters 97 Oman 1,232 0 0 293 1,525 98 Libya 99 Saudi Arabia 100 Kuwait 101 United Arab Emirates Industrial market economies 102 Spain 103 Ireland 104 Italy 105 New Zealand 106 United Kingdom 107 Belgium 108 Austria 109 Netherlands 110 France 111 Japan 112 Finland 113 Germany, Fed. Rep. 114 Denmark 115 Australia 116 Sweden 117 Canada 118 Norway 119 United States 120 Switzerland East European nonmarket economies 121 Hungary 7,380 953 1,943 10,276 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Bern. Rep. 127 Rornania 6,296 0 937 566 . 7,799 128 USSR 209 Table 16. Flow of public and private external capital Gross inflow Repayment of principal Net inflow0 (millions of dollars) (millions of dollars) (millions of dollars) Public and Public and Public and publicly Private publicly Private publicly Private guaranteed nonguaranteed guaranteed nonguaranteed guaranteed nonguaranteed 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 Low-income economies China and India Other low-income Sub-Saharan Africa 1 Ethiopia 27 246 0 0 15 53 0 0 12 193 0 0 2 Bangladesh 537 .. 0 97 0 .. 439 0 3 Mali 21 114 0 0 (.) 10 0 0 21 104 0 0 4 Zaire 31 220 . 28 143 . .. 3 77 5 Burkina Faso 2 57 0 0 2 15 0 0 () 43 0 0 6 Nepal 7 Burma 16 1 79 286 0 0 0 0 2 18 96 5 0 0 0 0 2 2 189 74 0 0 0 0 8 Malawi 38 111 0 0 3 50 0 0 36 61 0 0 9 Niger 12 73 . . 2 40 10 33 10 Tanzania 50 160 .. 10 41 . . 40 119 11 Burundi 1 80 0 0 () 9 0 0 71 0 0 12 Uganda 26 92 0 0 4 55 0 0 22 37 0 0 13 logo 5 51 0 0 2 30 0 0 3 21 0 0 14 Central African Rep. 2 34 0 0 2 6 0 0 1 27 0 0 15 India 890 2874 25 835 307 827 25 305 583 2,048 0 530 16 Madagascar 10 161 0 0 5 85 0 0 5 76 0 0 17 Somalia 4 106 0 0 1 24 0 0 4 82 0 0 18 Benin 2 38 0 0 1 22 0 0 1 17 0 0 19 Rwanda (.) 42 0 0 (.) 3 0 0 (.) 39 0 0 20 China .. .. .. .. ,. .. 21 Kenya 32 527 .. .. 16 205 .. 17 322 22 Sierra Leone 23 Haiti 8 4 23 58 0 0 0 10 13 . 0 . 0 2 10 47 0 0 0 4 0 0 0 24 Guinea 25 Ghana 90 42 79 102 0 0 11 12 11 84 55 . 0 0 . .. 0 79 30 1 46 5 0 0 26 Sri Lanka 61 410 . . 6 28 99 . . 2 34 311 3 27 Sudan 52 181 0 0 22 43 0 0 30 139 0 0 28 Pakistan 485 1,183 3 4 114 617 11 371 566 2 7 2 1 29 Senegal 15 219 1 . . 5 40 3 2 11 179 30 Afqhanistan . . .. 0 0 . .. 0 0 . . . 0 0 31 Bhutan . . . . ,. . . .. . . ,. . 32 Chad 6 7 0 0 2 2 0 0 4 6 0 0 33 Kampuchea, Oem. . . . . .. .. .. . . .. .. .. . . 34 Lao POR .. .. .. .. .. .. .. .. 35 Mozambique .. . . .. . .. .. . . .. . . . 36 V/etNam .. .. .. . .. . . . . .. Middle-income economies Oil exporters Oil importers Sub-Saharan Africa Lower middle-income 37 Mauritania 4 100 0 0 3 19 0 0 81 0 0 38 Liberia 39 Zambia 7 95 0 ,. 0 12 22 50 .. 0 .. 0 4 318 1 73 0 0 351 250 . . 33 200 40 Lesotho (.) 28 0 0 (.) 17 0 0 (.) 11 0 0 41 Bolivia 55 180 . . .. 17 119 .. .. 38 61 42 Indonesia 441 3,846 195 1,080 59 1,628 61 680 382 2,219 134 400 43 YemenArabRep. .. 204 0 0 .. 51 0 0 .. 153 0 0 44 Yemen, PDR 1 169 0 0 0 24 0 0 1 145 0 0 45 CotedIvoire 77 417 . . .. 27 237 .. .. 50 180 46 Philippines 128 1,264 276 70 73 354 186 174 56 910 90 104 47 Morocco 163 1,330 . . 36 639 . .. 127 690 33 . . 48 Honduras 30 300 10 4 55 3 36 26 245 7 49 El Salvador 50 PapuaNewGuinea 8 25 212 86 24 111 (.) 245 3 6 122 47 16 20 8 175 25 2 90 39 91 8 7 70 0 51 Egypt, Arab Rep. 394 2,704 .. 55 297 1,709 .. 105 97 995 . 50 5 . 52 Nigeria 62 2,124 25 300 36 1,991 30 200 26 133 100 53 Zimbabwe .. 220 . . .. 5 157 . . . . . 63 54 Cameroori 28 182 11 218 4 115 2 83 24 67 9 134 55 Nicaragua 44 346 0 0 16 25 0 0 28 321 0 0 56 Thailand 51 1,492 169 1,417 23 689 107 704 27 804 62 713 57 Botswana 3 76 0 0 (.) 18 0 0 3 58 0 0 58 Dominican Rep. 45 278 22 5 7 39 20 30 38 239 2 25 59 Peru 148 1,000 240 130 101 321 233 214 47 679 7 84 60 Mauritius 2 92 .. 4 1 50 . . 4 1 42 .. (.) 61 Congo,People'sRep 21 127 0 0 6 173 0 0 15 47 0 0 62 Ecuador 41 390 .. . . 16 202 .. . 25 188 . 63 Jamaica 15 384 .. 6 194 .. .. 9 190 64 Guatemala 37 235 6 3 20 112 2 52 17 123 4 49 65 Turkey 328 2,424 1 81 128 1,178 3 55 200 1,246 2 26 Note: For data comparability and coverage, see the technical notes. 210 Gross nt low Repayment of principal Net mt Iowa (millions of dollars) (millions of dollars) (millions of dollars) Public and Public and Public and publicly Private publicly Private publicly Private guaranteed nonguaranteed guaranteed nonguaranteed guaranteed nonguaranteed 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 66 Costa Rica 30 205 30 .. 21 114 20 12 9 91 10 67 Paraguay 15 240 . . (.) 7 60 20 8 181 . 19 68 Tunisia 87 707 .. 45 460 . 42 247 69 Colombia 254 1753 299 78 548 59 142 176 1,205 157 70 Jordan 14 625 0 0 3 165 0 0 12 460 0 0 71 SyrianArabRep. 60 435 0 0 30 247 0 0 30 188 0 0 72 Angola .. 73 Cuba .. .. .. .. .. .. 74 Korea, Oem. Rep. . . . .. .. . . . .. 75 Lebanon 12 29 0 0 2 40 0 0 9 11 0 0 76 Mongolia .. .. Upper middle-income 77 Chile 398 2,125 247 232 164 321 41 295 234 1,804 206 63 78 Brazil 884 9,615 900 290 255 1,603 200 706 629 8,012 700 416 79 Portugal 18 2,521 20 46 63 1,533 22 108 45 988 1 62 80 Malaysia 44 1,951 . . . . 45 514 . . -1 1,437 81 Panama 67 347 0 0 24 231 0 0 44 116 0 0 82 Uruguay 38 189 13 0 47 127 4 24 10 62 9 24 83 Mexico 772 4,819 603 2144 475 3,663 542 1760 297 1,156 61 384 84 Korea, Rep. of 441 5,487 32 1,102 198 2,488 7 295 242 2,999 25 807 85 Yugoslavia 180 542 465 878 168 257 204 1,294 12 286 261 416 86 Argentina 487 520 .. 342 486 . 146 34 87 South Africa .. ,. .. .. .. .. 88 Algeria 292 3,014 0 0 33 3,269 0 0 259 255 0 0 89 Venezuela 224 316 .. .. 42 1,099 . . .. 183 784 90 Greece 164 2,318 144 255 61 602 37 208 102 1,717 107 47 91 Israel 410 1,875 . 25 890 .. .. 385 985 92 Hong Kong 0 105 .. .. 36 1 69 2 1 . 93 Trinidad and Tobago 8 104 0 0 10 36 0 0 68 94 Singapore 58 630 . . . . 6 188 .. . . 52 441 95 Iran, Islamic Rep. .. . .. .. .. .. .. .. 96 Iraq .. .. .. .. High-income oil exporters 97 Oman 275 . . 0 . . 128 . . 0 . . 147 98 Libya 99 Saudi Arabia 100 Kuwait 101 United Arab Emirates Industrial market economies 102 Spain 103 lreand 104 Italy 105 New Zealand 106 United Kingdom 107 Belgium 108 Austria 109 Netherlands 110 France 111 Japan 112 Finland 113 Germany. Fed. Rep. 114 Denmark 115 Australia 116 Sweden 117 Canada 118 Norway 119 United States 120 Switzerland East European nonmarket economies 121 Hungary 2,856 . . 0 .. 1,842 . 0 . 1,014 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Oem. Rep. 127 Romania .. 159 . 0 . . 1,259 .. 0 .. 1,100 . . 0 128 USSR a. Gross inflow less repayment of principal may not equal net inflow because of rounding. 211 Table 17. Total external public and private debt and debt service ratios Total long-term debt Total long-term debt service as percentage of: Total interest disbursed and outstanding payments on Exports of Millions of As percentage long-term debt goods and dollars of GNP (millions of dollars) GNP services 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 Low-income economies China and India Other low-income Sub-Saharan Africa 1 Ethiopia 169 1,384 95 295 6 31 12 1.8 11 4 138 2 Bangladesh 5,154 40.0 75 13 142 3 Mali 238 960 88 1 959 () 7 0.3 17 14 8.0 4Zaire .. .. ,, 5 Burkina Faso 21 407 6.4 426 (.) 7 0.6 23 6.2 6 Nepal 3 427 03 170 (.) 5 03 04 34 7 Burma 101 2,219 47 349 3 62 10 25 159 369 8 Malawi 122 731 43.2 63.5 3 32 2.1 7.2 7.2 9 Niger . . 840 76.7 . . . . 10 Tanzania 265 2,654 20 7 69.6 11 Burundi 7 334 31 35.8 (.) 8 0.3 19 12 Uganda 138 675 7.3 20.5 4 32 0.4 1.7 2.7 13 Togo 40 659 16,0 100.1 1 37 09 10.1 29 26.3 14 Central African Rep. 24 224 13.5 37.1 1 6 1.6 2.0 4.8 8.0 15 India 8,040 25,014 15.1 13.6 195 863 1.0 1.1 234 13.8 16 Madagascar 93 1,636 10.8 730 2 31 0.8 5.2 3.5 17 Somalia 77 1,233 24.4 90.4 (.) 3 03 2.0 21 28.9 18 Benin 41 582 16.0 59.8 (.) 17 0.7 39 23 19 Awanda 2 244 0.9 15.1 (,) 3 0.1 0.4 12 3.3 20 China 21 Kenya 406 3,062 263 533 . 22 Sierra Leone 59 342 14 3 34.7 2 4 2.9 1.6 9.9 7.2 23 Haiti 40 494 10.3 27.3 () 6 1.0 1.0 77 56 24 Guinea 312 1,168 47.1 59.5 4 21 2.2 5.3 25 Ghana . . , , , . . . , . . 26 Sri Lanka . . 2,464 , , 41.9 . , 106 35 11 5 27 Sudan 307 5,659 152 77.2 13 65 17 106 13.6 28 Pakistan 3,065 9,979 30.6 29.7 77 317 19 2.8 23.7 27.1 29 Senegal 131 1,565 155 69.4 2 53 11 42 3.8 30 Afghanistan . . . . . , , , . . 31 Bhu(an , . . . . . . . 32 Chad 32 109 11.9 .. (.) 1 1.0 .. 39 1.7 33 Kampuchea, Oem. . . . . . . . '' '' 34 Lao PDR .. 35 Mozambique .. . . .. , . .. . . 36 Viet Nam .. . .. . . . .. .. Middle-income economies Oil exporters Oil importers Sub-Saharan Africa Lower middle-income 37 Mauritania 27 1,171 139 171.2 (.) 23 17 6.2 3.1 100 38 Liberia 159 757 49,9 77.4 6 20 55 4.3 8.1 86 39 Zambia 653 2,802 37 5 1154 ,. 40 Lesotho 8 134 7.7 24.3 (.) 4 05 3.8 4.1 5.1 41 Bolivia 492 3,544 36.1 1087 . . , , , . . 42 Indonesia 2,904 26,683 322 35.2 45 1,900 1.8 55 138 190 43 YemenArabRep. . . 1,688 .. 44.4 16 .. 1.8 .. 26.6 44 Yemen, PDR 1 1,252 1069 0 12 30 0 22.0 45 Cole d'lvoire 267 6,185 19 1 1075 46 Philippines 1,494 14,135 21.1 439 912 45. . 179 47 Morocco ,. .. 48 Honduras 115 2,003 16.3 66 1 4 90 1.5 6.0 52 204 49 El Salvador 176 1,502 173 38.0 9 74 31 5.2 12.0 19.5 50 Papua New Guinea 209 1,815 334 78.1 9 148 47 15.9 24.1 35.9 51 Egypt,Arab Rep. . 16,358 51.3 . 698 . 7.9 341 . . 52 Nigeria 595 12.710 5.9 17.0 28 1.282 09 46 7.0 27.9 53 Zimbabwe . . 1,523 29.9 . , 54 Cameroon 140 2,347 13.0 31.3 5 164 1.0 4.8 3.9 145 55 Nicaragua 147 3,835 148 141.8 7 34 23 2.2 10.5 17.5 56 Thailand 726 10,936 11.1 26.3 33 843 2.5 5.4 14.0 21.5 57 Botswana 15 276 17.9 31 3 (.) 15 0.7 3.8 3.8 . 58 DominicanRep. 368 2,544 25.2 53.6 13 119 2.7 39 154 28.1 59 Peru 2,655 11,290 39.1 68.2 162 457 7.3 6.0 40.0 24.9 60 Mauritius 367 .. 36.5 26 .. 7.9 .. 15.6 61 Congo, People's Rep. 144 1,396 539 76.2 3 78 33 13 7 11.0 20.5 62 Ecuador 242 6,807 147 751 .. , 63 Jamaica 982 2,255 72 8 1088 64 Guatemala 120 1,619 65 17.6 7 96 1.6 28 8.2 20.6 65 Turkey 1,896 16,199 148 32.3 45 1.093 1,4 4.6 22.7 23.8 Note: For data comparability and coverage, see the technical notes, Public and private debt includes public, publicly guaranleed, and private nonguaranteed debt; data are shown only when available for all three categories. 212 Total long-term debt Total long-term debt Total interest service as percentage of: disbursed and outstanding payments on Exports of Millions of As percentage long-term debt goods and dollars 0tGNP (millionsof dollars) GNP services 1970 1984 1970 1984a 1970 1984 1970 1984 1970 1984 66 Costa Rica 246 3697 25.3 114.0 14 228 5.7 10.9 19.9 27.9 67 Paraguay . 1397 36.2 . . 60 .. 3.6 . . 15.5 68 Tunisia . . 3900 48.5 . . . .. .. 69 Colombia 1,582 9,417 22.5 25.7 59 622 2.8 3.6 19.3 24.7 70 Jordan 119 2,336 23.5 62.0 2 117 09 7.5 3.6 14.8 71 Syrian Arab Rep. 232 2,453 10.6 15.2 6 83 1.6 2.0 11.0 12.9 72 Angola .. .. .. .. .. .. .. 73 Cuba .. .. .. .. .. .. .. 74 Korea, Dem. Rep. .. .. .. .. .. .. .. 75 Lebanon 64 179 4.2 . . 1 13 0.2 76 Mongolia .. .. .. . . .. .. .. Upper middle-income 77 Chile 2,568 17,266 32.1 100.2 104 2,011 3.9 15.2 24.2 54.6 78 Brazil 4,940 87,013 11 7 44.0 222 8,529 1,6 5.5 21.7 35.8 79 Portugal 570 11,153 9.2 61.7 34 1,057 1.9 14.9 . 37.8 80 Malaysia 81 Panama 194 3,091 19.5 73.3 7 288 3.1 12.3 7.7 7.9 82 Uruguay 298 2,674 12.5 54.5 17 295 2.9 9.1 235 32.4 83 Mexico 5,966 87,507 17.0 54.2 283 10298 3.7 9.7 44.3 486 84 Korea, Rep. of 1,972 29,990 224 37.0 75 2,555 3.2 6.6 20.3 15.8 85 Yugoslavia 2,053 17,060 15.0 42.2 104 2,341 3.5 9.6 19.7 280 86 Argentina 5,169 38,171 236 46.8 . . .. .. 87 South Africa 88 Algeria 937 12,052 19.3 24.3 10 1,291 0.9 9.2 3.8 33.6 89 Venezuela 964 23,747 8.7 52.7 . . . . , . , , . , . 90 Greece 1,293 11,102 12.7 33.2 63 873 1.6 50 14.6 229 91 Israel 2,635 19,868 47.9 99.5 . . . . . . . . .. 92 Hong Kong .. . . .. .. .. . . . . 93 Trinidad and Tobago 101 941 12.2 10.5 6 31 1.9 0.7 4.4 2.4 94 Singapore . . .. .. .. .. . . .. .. 95 Iran, Islamic Rep. . . . . . . 96 Iraq High-income oil exporters 97 Oman 1,232 .. 17.2 . . 86 . . 3.0 . . 4.6 98 Libya 99 Saudi Arabia 100 Kuwait 101 United Arab Emirates Industrial market economies 102 Spain 103 Ireland 104 Italy 105 New Zealand 106 United Kingdom 107 Belgium 108 Austria 109 Netherlands 110 France 111 Japan 112 Finland 113 Germany Fed. Rep. 114 Denmark 115 Australia 116 Sweden 117 Canada 118 Norway 119 United States 120 Switzerland East European nonmarket economies 121 Hungary 7,380 . . 37.5 . . 693 . . 12.9 . . 24.2 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Bern Rep. 127 Roman/a 6,296 16.3 . 415 .. 4.3 .. 12.3 128 USSR a. Figures in italics are for 1983, not 1984. 213 Table 18. External public debt and debt service ratios External public debt Interest payments outstanding and disbursed on external Debt service as percentage of Millions of As percentage public debt Exports of dollars of GNP (millions of dollars) GNP goods and services 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 Low-income economies 14,6471 72,1081 16.8w 23.8w 3601 19921 1.1 w 1.6w 12.5w 13.5w China and India 7,947 t 22,403 1 . . 189 I 635 1 Other low-income 6,707 I 49,705 I 19.9 w 42.4 w 171 I 1,358 I 1.4w 3.0 w 8.6w 17.0w Sub-Saharan Africa 3,1871 29,0371 17.4w 54.3w 80 I 7931 1.3w 3.9w 5.2w 13.8w 1 Ethiopia 169 1,384 9.5 295 6 31 1.2 18 11.4 13.8 2 Bangladesh . . 5,154 . . 40.0 . . 75 . . 1.3 , , 14.2 3 Mali 238 960 88.1 95.9 (,) 7 0.3 1.7 1.4 8.0 4 Zaire 311 4,084 17.6 132.0 9 210 2.1 11.4 4.4 77 5 Burkina Faso 21 407 64 426 (.) 7 0.6 2.3 6.2 6 Nepal 3 427 03 17.0 (.) 5 0.3 0.4 . . 3.4 7 Burma 101 2,219 4.7 349 3 62 10 2.5 15.9 36.9 8 Malawi 122 731 43.2 635 3 32 2.1 7.2 72 9 Niger 32 678 8.7 61.9 1 27 0.6 6.1 3.8 10 Tanzania 250 2,594 19.5 68.0 6 30 1.2 1.9 4.9 11 Burundi 7 334 3.1 35.8 (.) 8 0.3 1.9 24 12 Uganda 138 675 7.3 13.5 4 32 0.4 1.7 27 13 Togo 40 659 16.0 100.1 1 37 0.9 10.1 29 26.3 14 Central African Rep. 24 224 13.5 37.1 1 6 1.6 2.0 4.8 8.0 15 India 7,940 22,403 14.9 12.2 189 635 0.9 0.8 22.0 10 1 16 Madagascar 93 1,636 108 73.0 2 31 0.8 52 3.5 17 Somalia 77 1,233 24.4 90.4 () 3 0.3 2.0 2.1 28.9 18 Benin 41 582 160 598 (.) 17 0.7 3.9 2.3 19 Rwanda 2 244 0.9 15.1 (.) 3 0.1 0.4 1.2 3.3 20 China .. .. ., .. .. .. .. 21 Kenya 319 2,633 20.6 45.8 12 144 1.8 6.1 5.4 21.5 22 SierraLeone 59 342 14.3 34.7 2 4 2.9 1.6 9.9 7.2 23 Haiti 40 494 10.3 27.3 (.) 6 1.0 1.0 7.7 5.6 24 Guinea 312 1,168 47.1 59.5 4 21 2.2 5.3 25 Ghana 495 1,122 21.9 22.9 12 26 1.1 1.7 5.0 13.2 26 Sri Lanka 317 2,420 16.1 41.2 12 103 2.0 3.4 10.3 11.2 27 Sudan 307 5,659 15.2 77.2 13 65 1.7 10.6 13.6 28 Pakistan 3,060 9,953 30.5 29.6 76 314 1.9 28 23.6 26.7 29 Senega 100 1,555 11.9 68.9 2 53 0.8 41 2.8 30 Afghanistan .. .. , .. . . . . 0 31 Bhu(an . 32 Chad 32 109 11.9 (.) 1.0 .. 3.9 1.7 33 Kampuchea, Dem. , , 34 Lao PDR ,, 35 Mozambi'que 36 Vief Nam Middle-income economies 34,462 1 461,722 1 12.4w 35.2w 1,312 t 37,419 1 1.6 w 5.1 w 9.7w 17.2w Oil exporters 12,122 1 187,348 1 12.7w 34.9w 472 I 16,146 1 1.7w 5.9w 11.1 w 21.8 w Oil importers 22,340 I 274,424 I 12.3w 35.3w 8401 21,273 I 1,5w 4.5w 9.0w 14.4w Sub-Saharan Africa 2,107 I 26,700 I 12.5w 26.3w 78 1 2,031 1 1.2w 4.8 w 4.9 w 20.1 w Lower middle-income 14,6551 168,0641 15.2w 35.0w 4331 10,2841 1.6w 4.6w 9.5w 19.4w 37 Mauritania 27 1,171 13.9 171.2 (.) 23 1.7 62 3.1 10.0 38 Liberia 159 757 499 77.4 6 20 55 43 81 86 39 Zambia 623 2,779 35.7 114.4 26 63 3.4 4.7 5.9 11.3 40 Lesotho 8 134 7.7 24.3 (.) 4 0.5 3.8 41 5.1 41 Bolivia 481 3,204 35.4 98.3 7 201 1.7 9.8 11.4 38.3 42 Indonesia 2,443 22,883 27.1 302 24 1,620 0.9 4.3 6.9 14.7 43 YemenArab Rep. .. 1,688 .. 44,4 .. 16 .. 1.8 . . 26.6 44 Yemen, PDR 1 1,252 .. 1069 0 12 .. 3.0 0 22.0 45 Coted'lvoire 256 4.835 18.3 840 11 404 2.7 11.1 6.8 21.3 46 Philippines 574 11,176 81 34.7 24 780 1.4 3.5 7.3 14.1 47 Morocco 711 10,169 18.0 829 23 494 1.5 9.2 8.4 37.6 48 Honduras 95 1,841 13.6 60.8 3 80 0.9 4.4 3.1 15.2 49 ElSalvador 88 1,388 8.6 35.1 4 72 0.9 4.9 3.6 17.2 50 PapuaNewGuinea 36 925 5.8 39.8 1 86 0.1 5.7 0.6 12.9 51 Egypl,ArabRep. 1.750 15,808 23.2 49.6 54 643 4.6 7.4 36.4 31.9 52 Nigeha 480 11,815 4.8 15.8 20 1,172 0.6 4.2 4.2 25.4 53 Zimbabwe 233 1,446 15 7 28.4 5 119 0.6 5.4 2.3 20.0 54 Cameroon 131 1,738 12.1 232 4 107 0.8 30 31 8.9 55 Nicaragua 147 3,835 14.8 141.8 7 34 2.3 2.2 10.5 17.5 56 Thailand 324 7,568 49 18.2 16 560 0.6 3.0 34 12.0 57 Botswana 15 276 17.9 31.3 (.) 15 0.7 3.8 10 3.8 58 Dominican Rep. 226 2,388 15.5 50.3 5 108 0.8 3.1 4.6 18.0 59 Peru 856 9.825 12.6 59.4 44 286 2.1 3.7 11.6 15.3 60 Mauritius 32 354 143 35.3 2 25 1.3 7.5 3.0 14.8 61 Congo, People's Rep. 144 1,396 539 76.2 3 78 3.3 13.7 11.0 20.5 62 Ecuador 193 6,630 11 7 731 7 790 1.3 10.9 8.6 33.4 63 Jamaica 160 2,175 11.8 1049 9 92 1.1 13.8 2.7 21.0 64 Guatemala 106 1,514 5.7 16.5 6 85 1.4 2.1 74 15.5 65 Turkey 1,854 15,774 14.4 31.5 42 1,048 1.3 4.4 22.0 22.8 Note: For data comparability and coverage, see the technical notes. 214 External public debt Interest payments outstanding and disbursed on external Debt service as percentage of: Millions of As percentage public debt Exports of dollars of GNP (millions of dollars) GNP goods and services 1970 1984 1970 1984a 1970 1984 1970 1984 1970 1984 66 CostaRica 134 3380 13.8 104.2 7 207 2.9 9.9 10.0 25.3 67 Paraguay 112 1,287 13.1 33.3 4 58 1.2 30 11.8 13.0 68 Tunisia 541 3,707 38.6 46.1 18 222 4.5 8.5 19.0 24.4 69 Colombia 1,299 7,980 185 21 8 44 547 1 7 30 120 206 70 Jordan 119 2,336 23.5 62.0 2 117 0.9 7.5 3.6 14.8 71 SyrianArabRep. 232 2,453 10.6 15.2 6 83 1.6 2.0 11.0 12.9 72 Angola .. .. .. .. .. .. .. 73 Cuba .. .. .. .. .. .. .. 74 Korea, Dem. Rep. . . . . .. .. . . .. .. 75 Lebanon 64 179 4.2 .. 1 13 0.2 76 Mongolia .. . . . . .. .. .. . . . Upper middle-income 19,807 f 293,708 t 11.0 w 35.3 iv 880 1 27,135 1 1.6 w 5.3 iv 9.8 iv 16.3 iV 77 Chile 2,067 10,839 25.8 62.9 78 939 3.0 7.3 19.0 26.2 78 Brazil 3,234 66,502 7.7 336 133 6,433 0.9 4.1 12.5 266 79 Portugal 485 10,583 7.8 58.5 29 1,007 1.5 14.0 . . 35.6 80 Malaysia 390 11,846 10.0 39.4 21 959 1.7 4.9 36 7.7 81 Panama 194 3,091 19.5 73.3 7 288 3.1 12.3 7.7 7.9 82 Uruguay 269 2,545 11.3 51.9 16 284 2.6 8.4 21.6 29.8 83 Mexico 3,196 69,007 9.1 42.8 216 7,428 2.0 6.9 23.6 34.3 84 Korea, Rep. of 1,797 24,642 20.4 30.4 70 2,070 3.0 5.6 19.4 13.5 85 Yugoslavia 1,199 8,690 8.8 21.5 72 687 1.8 2.3 9.9 6.8 86 Argentina 1,878 28,671 8.6 35.1 121 2,392 2.1 3.5 21.5 29.1 87 South Africa .. .. .. . . .. ,. .. . . 88 Algeria 937 12,052 19.3 243 10 1,291 0.9 92 3.8 33.6 89 Venezuela 728 17,247 6.6 38.3 40 1,437 0.7 5.6 2.9 13.4 90 Greece 905 9,456 8.9 28.3 41 742 1.0 4.0 9.3 18.3 91 Israel 2,274 15,415 41.3 772 13 996 0.7 9.4 2.7 17.9 92 Hong Kong 2 270 01 08 0 17 00 0.2 00 02 93 Trinidad and Tobago 101 941 12.2 10.5 6 31 1.9 0.7 44 2.4 94 Singapore 152 1,911 7.9 10.6 7 134 0.6 1.8 0.6 1.0 95 Iran, Islamic Rep. 96 Iraq .. .. .. .. . .. .. . . .. .. . . , .. .. .. High-income oil exporters 97 Oman 1,232 . . 17.2 .. 86 .. 3.0 .. 4.6 98 Libya 99 Saudi Arabia 100 Kuwait 101 United Arab Emirates Industrial market economies 102 Spain 103 Ireland 104 Italy 105 New Zealand 106 United Kingdom 107 Belgium 108 Austria 109 Netherlands 110 France 111 Japan 112 Finland 113 Germany, Fed. Rep. 114 Denmark 115 Australia 116 Sweden 117 Canada 118 Norway 119 United States 120 Switzerland East European nonmarket economies 121 Hungary 7,380 . . 37.5 . 693 . . 12.9 . . 24.2 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Dem. Rep. 127 Romania 6,296 . 16.3 .. 415 .. 4.3 .. 12.3 128 USSR a. Figures zi italics are for 1983, not for 1984. 215 Table 19. Terms of external public borrowing Public loans with variable interest Average interest Average Average rates, as Commitments rate maturity grace period percentage of (millions of dollars) (percent) (years) (years) public debt 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 Low-income economies 3,028 10,357 2.8w 4.9w 31w 29w 9w 7 zr 0.1 Zr' 6.1 w China and India Other low-income 2,095 6,514 3.0w 3.8 a' 29 w 30 a' 9 Zr.' 7 zr 0.2 5.2 zr Sub-Saharan Africa 995 3,414 3.1 w 4.0w 27 zr 29 Zr' 8 Zr' 7 zr 0.3 5.3 zr 1 Ethiopia 21 448 4.3 45 32 31 7 6 00 7.7 2 Bangladesh 862 1.4 38 9 0.1 3 Mali 30 122 03 1.0 27 39 11 9 0.0 0.3 4 Zaire 258 117 65 3.5 13 24 4 5 0.0 8.8 5 Burkina Faso 9 78 2.3 1.8 37 29 8 8 0.0 1.4 6 Nepal 17 155 28 0.8 27 42 6 9 0.0 0.0 7 Burma 57 290 43 2.9 16 30 4 8 00 1.1 8 Malawi 13 124 3.8 30 30 42 6 9 0.0 128 9 Niger 18 116 1.2 2.6 40 29 8 7 0.0 160 10 Tanzania 284 75 12 6.6 40 15 11 4 1.6 0.4 11 Burundi 1 87 2.9 2.2 5 33 2 8 0.0 1.9 12 Uganda 12 252 3,7 35 28 38 7 8 0.0 1.5 13 Togo 3 55 4,5 44 17 34 4 9 0.0 9.1 14 Central African Rep. 7 13 20 3,4 36 28 8 7 0.0 0.0 15 India 933 3843 2.4 67 35 28 8 7 0.0 79 16 Madagascar 23 190 2.3 4.1 40 33 9 8 0.0 14.6 17 Somalia 2 112 0.0 0.2 3 29 3 7 00 0.0 18 Benin 7 119 18 46 33 31 7 7 0.0 8.9 19 Rwanda 9 57 0.8 1.0 50 39 10 10 00 0.0 20 China 21 Kenya 49 669 2.6 66 37 19 8 4 0.1 66 22 Sierra Leone 24 54 35 16 27 32 8 10.6 0.6 23 Haiti 5 68 6.8 2.9 10 29 8 0.0 31 24 Guinea 66 167 2.9 3.6 13 29 5 6 00 09 25 Ghana 55 144 24 06 39 47 10 10 0.0 0.0 26 Sri Lanka 79 340 30 49 27 28 5 7 0.0 14.7 27 Sudan 95 92 18 31 17 20 9 7 0.0 29 28 Pakistan 942 1384 27 52 32 28 12 7 00 68 29 Senegal 6 320 37 50 26 21 7 6 0.0 74 30 Afghanistan 31 Bhutan 32 Chad 4.8 2.6 25 0.0 33 Kampuchea, Dem. 34 Lao PDR 35 Mozambrque 36 VietNam Middle-income economies 9,356 57,251 6.2 Zr, 10.0 Zr' 17 zr 13 zr 5 Zr' 4 zr 1.8 a' 51.4 Zr' Oil exporters 2,862 21,724 6.3 zr 9.5 zr 18 zr 13 zr 4 zr 5 zr 2.0 zr 56.8 Zr.' Oil importers 6,494 1 35,5261 6.1 zr 10.2 zr 17 Zr' 13 zr 5 zr 4 zr 1.8 zr 47.7 Zr.' Sub-Saharan Africa 832 2,421 4.3 Zr' 8.6 zr 25 zr 16 ri 8 zr 4 zr 2.0 zr 40.4 Zt' Lower middle-income 3,858 1 24,726 4.9 zr 8.8 zr 23zr' l5zr' 6 zr 4 zr 0.6 zr 29.6 rr' 37 Mauritania 90 6.6 37 11 21 3 6 0.0 19 38 Liberia 12 92 5,5 6.6 19 29 5 6 0.0 16.7 39 Zambia 555 267 42 7.8 27 21 9 5 0.0 174 40 Lesolho (,) 63 5.5 29 25 41 2 9 0.0 5,4 41 Bolivia 24 258 3,7 81 26 16 6 3 00 29.0 42 Indonesia 519 4731 2.7 9.1 35 16 9 5 00 23.6 43 Yemen Arab Rep. 88 2.0 29 6 0.0 44 Yemen, PDR 62 137 0.0 2.7 28 22 13 4 00 0.0 45 Coted'lvoire 71 129 58 81 19 21 5 5 105 51.3 46 Phiippines 158 1551 74 90 11 15 3 4 09 41.0 47 Morocco 182 1,125 4.6 83 20 15 4 3 0.0 31 4 48 Honduras 23 237 4.1 88 30 19 7 4 0.0 16.8 49 El Salvador 12 246 4.7 7.5 23 18 6 6 00 160 50 Papua New Guinea 58 158 60 6.3 24 24 8 6 0.0 46 3 51 Egypt, Arab Rep. 448 2,522 7.7 6.9 17 17 2 4 0.0 1.7 52 Nigeria 65 928 6.0 10.4 14 9 4 2 2.6 56.0 53 Zimbabwe 278 90 16 5 00 40.1 54 Cameroon 41 271 47 4.9 29 25 8 6 0.0 57 55 Nicaragua 23 12 7.1 1.4 18 45 4 9 00 43 56 Thailand 106 1,194 6.8 8.7 19 17 4 7 0.0 29 4 57 Botswana 36 51 0.7 93 39 15 10 4 00 11.9 58 Dominican Rep 20 391 2.7 71 28 16 5 5 00 36 1 59 Peru 125 763 74 10.0 13 13 4 4 0.0 40.6 60 Mauritius 12 65 0.0 11.1 24 11 2 3 6.0 29 5 61 Congo. Peoples Rep. 33 189 2.6 10.0 18 8 7 2 0.0 164 62 Ecuador 78 427 6.1 9.2 20 15 4 3 0.0 71.5 63 Jamaica 24 629 6.0 81 16 17 3 5 0.0 21.9 64 Guatemala 50 282 5.4 93 26 14 6 4 10.3 20.3 65 Turkey 487 3,199 3.6 9.6 19 12 5 4 0.9 28.5 Note: For data comparability and coverage, see the technical notes. 216 Public loans with variable interest Average interest Average Average rates, as Commitments rate maturity grace period percentage of (millions of dollars) (percent) (years) (years) public debt 1970 1984 1970 1984 1970 1984 1970 1984 1970 1984 66 Costa Rica 58 121 5.6 7.1 28 8 6 5 7.5 56.9 67 Paraguay 14 145 56 9.4 25 15 6 3 0.0 17.2 68 Tunisia 141 602 3.4 9.5 27 12 6 4 0.0 15.5 69 Colombia 362 2785 5.9 10.4 21 14 5 4 0.0 42 7 70 Jordan 34 550 39 59 12 14 5 4 0.0 8.2 71 SyrianArabRep. 14 152 4.5 8.5 9 13 2 3 0.0 0.7 72 Angola .. . . 73 Cuba .. .. .. .. .. .. .. 74 Korea, Dem. Rep. .. .. .. .. .. . . . . .. 75 Lebanon 7 0 2.7 0.0 22 0 1 0 0.0 15.0 76 Mongolia . . . . . . . . .. .. .. Upper middle-income 5,498 t 32,5241 7.1 w 10.8w 13w 11 w 4w 4w 2.8w 63.9w 77 Chile 344 2,041 6.9 12.4 12 9 3 4 0.0 81.2 78 Brazil 1,400 7,483 7.1 12.2 14 9 3 3 7.0 79.1 79 Portugal 59 2,557 4.3 9.9 17 10 4 3 0.0 31.5 80 Malaysia 83 2,710 6.1 9.4 19 15 5 9 0.0 61.6 81 Panama 111 25 6.9 2.1 15 29 4 9 0.0 59,5 82 Uruguay 72 344 7.9 107 12 12 3 2 07 66.4 83 Mexico 826 5,290 8.0 11.0 12 11 3 5 57 830 84 Korea, Rep. of 677 4,642 6.0 9.7 19 12 6 4 1.3 46.8 85 Yugoslavia 198 35 7.1 8.0 17 6 6 3 3.4 56.0 86 Argentina 489 620 7.4 10.7 12 19 3 2 0.0 37 5 87 South Africa . . . . . S ' ' . . . . , , . 88 Algeria 289 3,002 6.5 10.0 10 9 2 1 2.8 26.4 89 Venezuela 198 30 8.2 10.0 8 20 2 3 2.6 93.8 90 Greece 242 1,994 7.2 10.5 9 9 4 5 35 690 91 Israel 439 921 7.3 12.3 13 30 5 10 0.0 27 92 Hong Kong 0 109 0.0 12.5 0 4 0 1 0.0 37.0 93 TrinidadandTobago 3 109 7.4 8.6 10 8 1 4 0.0 51.7 94 Singapore 69 614 6.8 9.8 17 10 4 2 0.0 36.7 95 Iran, Islamic Rep. . . . . . . . . . S ' . . . . 96 Iraq .. . . .. . , . . .. . High-income oil exporters 97 Oman 434 . . 9.0 .. 11 . 3 .. 24.0 98 Libya 99 Saudi Arabia 100 Kuwait 101 United Arab Emirates Industrial market economies 102 Spain 103 Ireland 104 Italy 105 New Zealand 106 United Kingdom 107 Belgium 108 Austria 109 Netherlands 110 France 111 Japan 112 Finland 113 Germany, Fed. Rep. 114 Denmark 115 Australia 116 Sweden 117 Canada 118 Norway 119 United States 120 Switzerland East European nonmarket economies 121 Hungarya 3,104 . , 10.0 . , 7 . . 3 . . 36.0 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Dem. Rep. 127 Romania 0 0 .. 0 .. 0 . . 46.0 128 USSR a. Includes only debt in convertible currencies. 217 Table 20. Official development assistance from OECD & OPEC members Amount 1965 1970 1975 1979 1980 1981 1982 1983 1984 1985 OECD Millions of US dollars 104 Italy 60 147 182 273 683 666 811 834 1133 1.099 105 NewZealand . 14 66 68 72 68 65 61 55 54 106 UnitedKingdom 472 500 904 2,156 1854 2,192 1800 1610 1,430 1,490 107 Belgium 102 120 378 643 595 575 499 476 442 430 108 Austria 10 11 79 131 178 220 236 158 181 248 109 Netherlands 70 196 608 1,472 1,630 1,510 1,472 1,195 1,268 1,123 110 France 752 971 2,093 3,449 4,162 4,177 4,034 3,815 3,788 4.022 111 Japan 244 458 1,148 2,685 3,353 3,171 3,023 3,761 4,319 3,797 112 Finland 2 7 48 90 111 135 144 153 178 211 113 Germany Fed. Rep. 456 599 1,689 3,393 3,567 3,181 3,152 3,176 2,782 2,967 114 Denmark 13 59 205 461 481 403 415 395 449 439 115 Australia 119 212 552 629 667 650 882 753 777 747 116 Sweden 38 117 566 988 962 919 987 754 741 841 117 Canada 96 337 880 1,056 1,075 1,189 1,197 1,429 1,625 1,638 118 Norway 11 37 184 429 486 467 559 584 543 555 119 United States 4,023 3,153 4,161 4,684 7,138 5,782 8,202 8,081 8,711 9,555 120 Switzerland 12 30 104 213 253 237 252 320 286 301 Total 6,480 6,968 13,847 22,820 27,267 25,542 27,730 27,555 28,707 29,518 OECD As percentage of donor GNP 104 Italy .10 .16 .11 .08 .17 .19 .24 .24 .33 .31 105 NewZealand .. .23 .52 .33 .33 .29 .28 .28 .25 .25 106 United Kingdom .47 .41 .39 .52 35 .43 .37 .35 .33 .33 107 Belgium .60 .46 .59 .57 .50 .59 .59 .59 .57 .53 108 Austria 11 .07 .21 .19 .23 .33 .35 .24 28 .38 109 Netherlands .36 .61 .75 98 1 03 1.08 1.08 91 1.02 .90 110 France .76 .66 .62 .60 .64 .73 .75 .74 .77 .79 111 Japan .27 23 .23 .27 .32 .28 .28 .32 .35 .29 112 Finland .02 .06 .18 .22 .22 .28 .30 .32 .36 .39 113 Germany, Fed. Rep .40 .32 40 .45 .44 .47 .48 .48 .45 48 114 Denmark .13 .38 .58 .77 .74 .73 .76 73 .85 .80 115 Australia .53 .59 .65 .53 .48 41 .57 .49 .45 .49 116 Sweden .19 38 .82 .97 .79 83 1.02 .84 .80 .86 117 Canada .19 .41 .54 .48 43 .43 .41 .45 .50 .49 118 Norway .16 .32 .66 93 85 .82 .99 1.10 1.03 1.00 119 United States .58 .32 .27 .20 .27 20 .27 .24 .24 .24 120 Switzerland .09 .15 19 .21 24 24 .25 .31 .30 31 OECD National currencies 104 Italy (billions of lire) 38 92 119 227 585 757 1,097 1,267 1,991 2,099 105 NewZealand(millionsof dollars) .. 13 54 66 74 78 86 91 95 109 106 UnitedKingdom(millionsot pounds) 169 208 407 1,016 797 1,081 1,028 1,061 1,070 1,149 107 Belgium(millionsoffrancs) 5,100 6,000 13.902 18852 17,400 21,350 22,800 24,339 25,527 25528 108 Austria(millionsotschillings) 260 286 1,376 1,751 2,303 3,504 4,026 2,838 3,622 5,132 109 Netherlands(millionsotguilders) 253 710 1,538 2,953 3,241 3,768 3,931 3,411 4,069 3,730 110 France(millionsof francs) 3,713 5,393 8,971 14,674 17,589 22.700 26,513 29,075 33,107 36,142 111 Japan(billionsof yen) 88 165 341 588 760 699 753 893 1,026 906 112 Finland(millionsofmarkkaa) 6 29 177 351 414 583 694 852 1,070 1,308 113 Germany, Fed. Rep. (millions ofdeutschemarks) 1,824 2,192 4,155 6,219 6,484 7,189 7,649 8,109 7,917 8,736 114 Denmark(millionsofkroner) 90 443 1,178 2,425 2,711 2,871 3,458 3,612 4,650 4,655 115 Australia(millionsofdollars) 106 189 421 563 585 566 867 834 883 1,066 116 Sweden(millionsofkronor) 197 605 2,350 4,236 4,069 4,653 6,201 5,781 6,129 7,233 117 Canada(millionsof dollars) 104 353 895 1,237 1,257 1,425 1,477 1,761 2,105 2,237 118 Norway(millionsofkroner) 79 264 962 2,172 2,400 2,680 3,608 4,261 4,432 4,771 119 United States (millions of dollars) 4,023 3,153 4,161 4,684 7,138 5,782 8,202 8,081 8,711 9,555 120 Switzerland (millionsof francs) 52 131 268 354 424 466 512 672 672 738 OECO Summary ODA (billions of U.S. dollars, nominal prices) 6.48 6.97 13.85 22.82 27.27 25.54 27.73 27.56 28.71 29.52 ODA as percentage of GNP .48 .34 .35 .35 .37 .34 .38 .36 .36 .36 ODA (billions of U.S. dollars, constant 1980 prices) 20.41 18.21 21.73 24.89 27.27 25.63 27.94 27.56 28.87 29.15 GNP (trillions of U.S. dollars, nominal prices) 1.35 2.04 3.92 6.56 7.31 7.42 7.33 7.61 7.94 8.31 GDP deflatorb .31 .38 .63 .91 1.00 99 .99 1.00 1.00 1.01 Note; For data comparability and coverage, see the technical notes. 218 Amount 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 OPEC Millions of US dollars 52 Nigeria 14 80 51 27 29 34 143 58 35 51 88 Algeria 31 13 43 42 281 82 55 131 61 46 89 Venezuela 31 113 24 98 110 124 66 125 141 90 95/ran/slam/c Rep, 642 751 162 231 -20 -72 -141 -193 15 96 Iraq 258 121 98 138 658 863 203 57 -37 -48 98 Libya 270 102 102 118 115 376 262 43 142 17 99 SaudiArabia 2,665 2916 2,909 5,215 3,971 5,775 5,575 3,910 3,661 3,315 100 Kuwait 956 731 1,302 993 970 1,140 1,154 1,168 1,006 1,018 101 UnitedArabEmirates 1,046 1,028 1,076 887 968 1,052 800 395 364 43 Qatar 317 180 170 95 282 286 248 139 11 13 Total OAPECC 5,543 5,091 5,700 7,488 7,245 9,574 8,297 5,843 5,208 4,404 Total OPEC 6,230 6,035 5,937 7,844 7,364 9,660 8,365 5,833 5,399 4,545 OPEC As percentage of donor GNP 52 Nigeria .04 .19 .11 05 .04 .04 .19 .08 .05 .07 88 Algeria .21 .08 .22 .17 .90 .20 .13 .31 .13 .09 89 Venezuela .11 .36 .07 .25 .23 .21 .10 .19 .22 .12 95 Iran, /s/amic Rep. 1.22 1.16 21 .33 -.02 - 08 -.15 - 18 .01 96 Iraq 1.95 76 .52 .61 1.97 235 92 .19 -11 -.14 98 Libya 2.39 .69 .58 .67 .48 1.16 .93 .14 .49 .06 99 Saudi Arabia 7.50 6.22 4.94 8.00 5.20 4.95 3.49 2.54 3.29 3.29 100 Kuwait 7.26 5.00 8.19 5.48 3.52 3.52 3.63 4.60 3.86 3.81 101 UnitedArabEmirates 11.69 8.95 739 6.36 5.08 3.82 2.60 1.34 1.44 .17 Qatar 1459 7.35 6.79 3.26 6.07 428 3.74 1.66 .13 .16 Total OAPEC 5 73 4 23 3 95 4.52 3.35 3.28 2.58 1.83 1.86 1.61 TotaIOPEC 2.92 2.32 1.96 2.39 1.76 1.81 1.47 .99 .95 1.16 Net bilateral flows to low-income economies 1965 1970 1975 1978 1979 1980 1981 1982 1983 1984 OECD As percentage of donor GNP 104 Italy .04 .06 .01 .01 01 01 .02 .04 .05 .09 105 NewZealand ,, .. .14 .01 .01 .01 .01 .00 .00 .00 106 United Kingdom .23 .15 .11 .14 .16 .11 .13 07 .10 .09 107 Belgium .56 .30 .31 .23 .27 .24 .25 .21 .21 .20 108 Austria .06 .05 .02 .01 .03 .03 .03 .01 .02 .01 109 Netherlands .08 .24 .24 .28 .26 30 37 .31 26 .29 110 France .12 .09 .10 07 07 08 .11 .10 .09 .14 111 Japan .13 11 08 05 .09 .08 .06 .11 .09 .07 112 Finland .. .. .06 .04 06 .08 .09 .09 .12 13 113 Germany.Fed.Rep. .14 .10 .12 .09 .10 08 .11 .12 .13 .11 114 Denmark .02 .10 .20 .29 .28 .28 .21 .26 .31 .28 115 Australia .08 .09 .10 .04 .06 .04 .06 .07 .05 .06 116 Sweden .07 .12 .41 .36 .41 .36 .32 .38 .33 .30 117 Canada .10 .22 .24 .17 .13 .11 .13 .14 .13 .15 118 Norway 04 .12 .25 34 37 31 28 37 39 .34 119 United States 26 .14 .08 .03 02 03 03 02 .03 .03 120 Switzerland .02 .05 .10 07 .06 .08 .07 .09 .10 .12 Total 20 .13 .11 .07 .08 .07 .08 .08 .08 .07 a. Preliminary esmates. b. See the technical notes. c Organization of Arab Petroleum Exporting Countries. 219 Table 21. Official development assistance: receipts Net disbursements of ODA from all sources Per capita As percentage (millions of dollars) (dollars) of GNP 1978 1979 1980 1981 1982 1983 1984 1984 1984 Low-income economies 7,661 t 9,370 t 11,415 t 11,071 t 11,066 10,881 t 11,012 t 4.6w 1.7w China and India 1,367 t 2,212 t 2,388 t 2,069 t 2,395 t 2,345 t 1.3 w 0.5 w Other low-income 6,372 t 8,003 t 9,202 t 8,684 t 8,998 t 8,486 t 8,667 t 14.2w 6.6 w Sub-Saharan Africa 3,432 t 4,626 5,284 t 5,434 t 5,501 t 5,436 5,508 t 21.4w 9.0w 1 Ethiopia 140 191 216 250 200 344 363 8.6 7.7 2 Bangladesh 988 1,166 1,283 1,093 1,346 1,071 1,202 12.3 9.3 3 Mali 163 193 267 230 210 215 320 436 320 4 Zaire 317 416 428 394 348 317 314 10.6 10.1 5 BurkinaFaso 159 198 212 217 213 184 188 28.7 19.7 6 Nepal 77 137 163 181 201 201 198 12.3 7.9 7 Burma 274 364 309 283 319 302 275 76 4.3 8 Malawi 99 142 143 138 121 117 159 23.2 138 9 Niger 157 174 170 193 259 175 162 26.1 14.8 10 Tanzania 424 588 678 702 683 621 559 260 147 11 Burundi 75 95 117 122 127 142 141 30.7 15.0 12 Uganda 23 46 114 136 133 137 164 10.9 33 13 Togo 103 110 91 63 77 112 110 37.3 16.7 14 Central African Rep 51 84 111 102 90 93 114 45.1 18.8 15 India 1,289 1,350 2,146 1,911 1,545 1,725 1,547 2.1 08 16 Madagascar 91 138 230 234 251 185 156 158 7.0 17 Somalia 212 179 433 374 462 327 363 69.4 18 Benin 62 85 91 82 80 87 77 197 80 19 Rwanda 125 148 155 154 151 151 165 28.2 10.2 20 China 17 66 477 524 670 798 08 0.3 21 Kenya 248 351 397 449 485 402 431 22 1 75 22 Sierra Leone 40 54 93 61 82 66 61 16.5 6.2 23 Haiti 93 93 105 107 128 134 135 251 7.5 24 Guinea 60 56 90 107 90 68 123 20.8 6.3 25 Ghana 114 169 193 148 142 110 216 17.5 57 26 Sri Lanka 324 323 393 378 416 474 468 295 8.0 27 Sudan 318 671 588 681 740 957 616 289 28 Pakistan 639 684 1.075 768 850 669 698 7.5 21 29 Senegal 223 307 262 397 285 322 333 52.2 14.8 30 Afghanistan 101 108 32 23 9 14 7 0.4 31 Bhutan 3 6 8 10 11 13 18 4.8 6.0 32 Chad 125 86 35 60 65 95 115 23.6 33 Kampuchea,Dem. 0 108 281 130 44 37 17 2.4 34 Lao POR 72 54 41 35 38 30 34 96 35 Mozambique 105 146 169 144 208 211 259 193 36 VietNam 370 336 229 242 136 106 109 1.8 Middle-income economies 10,312 12,418 14,061 13,862 12,329 12,213 12,291 10.8w 0.9 w Oil exporters 4,970 5,224 5,417 5,124 4,567 4,625 4,901 8.8w 0.9w Oil importers 5,341 7,194 8,645 8,738 7,762 7,589 7,390 12,7w 0.9 w Sub-Saharan Africa 1,123 1,331 1,642 1,544 1,605 1,482 1,613 10.9w 1.5w Lower middle-income 8,562 t 10,426 f 12,293 t 11,892 t 10,642 t 10,042 t 10,049 15.0w 2.0w 37 Mauritania 238 167 176 231 193 172 168 101,5 246 38 Liberia 48 81 98 109 109 118 133 62.6 136 39 Zambia 185 277 318 231 309 216 238 37.1 9.8 40 Lesotho 50 64 91 101 90 104 97 65.8 17.6 41 Bolivia 156 161 170 169 147 173 172 27.7 55 42 Indonesia 635 721 950 975 906 751 673 42 0.9 43 Yemen Arab Rep. 277 268 472 411 412 330 314 40.4 8.2 44 Yemen, PDR 91 76 100 87 143 106 85 41.9 7.3 45 Coted'lvoire 131 162 210 124 137 157 128 13.0 2.2 46 Philippines 249 267 300 376 333 429 397 7.4 1.2 47 Morocco 428 473 896 1,034 771 397 286 13.4 23 48 Honduras 93 97 103 109 158 192 290 68.6 96 49 El Salvador 55 60 97 167 223 295 263 48.6 66 50 Papua New Guinea 296 284 326 336 311 333 322 94.0 13.8 51 Egypt, Arab Rep 2,370 1,450 1,387 1,292 1,417 1,431 1,764 38.4 5.5 52 Nigeria 43 27 36 41 37 48 33 0.3 00 53 Zimbabwe 9 13 164 212 216 208 298 36.7 58 54 Cameroon 178 270 265 199 212 130 188 19.0 2.5 55 Nicaragua 42 115 221 145 121 120 114 36.0 4.2 56 Thailand 260 393 418 407 389 432 475 9.5 1.1 57 Botswana 69 100 106 97 102 104 103 99.2 11.6 58 Dominican Rep. 50 78 125 105 137 102 198 32.4 4.2 59 Peru 143 200 203 233 188 297 310 17.0 1.9 60 Mauritius 44 32 33 58 48 41 36 35.1 35 61 Congo, People's Rep. 81 91 92 81 93 109 98 53.9 53 62 Ecuador 45 70 46 59 53 64 136 149 1.5 63 Jamaica 122 123 126 155 180 181 170 77.6 8.2 64 Guatemala 72 67 73 75 64 76 65 84 0.7 65 Turkey 178 594 952 724 659 353 242 5.0 0.5 Note For data comparability and coverage, see the technical notes 220 Net disbursements of ODA from all sources Per capita As percentage (millions of dollars) (dollars) of GNP 1978 1979 1980 1981 1982 1983 1984 1984 1984 66 Costa Rica 51 56 65 55 80 252 217 860 6.7 67 Paraguay 43 31 31 55 85 51 50 153 1.3 68 Tunisia 299 210 233 252 210 214 180 25,8 2.2 69 Colombia 71 54 90 102 97 86 88 3.1 0.2 70 Jordan 431 1299 1275 1065 799 789 677 200.0 18.0 71 SyrianArabRep. 728 1,803 1,727 1,495 952 970 859 85.1 5.3 72 Angola 47 47 53 61 60 76 93 109. 73 Cuba 49 49 32 14 17 13 12 1.2 74 Korea, Oem Rep. .. .. .. .. ,, .. .. 75 Lebanon 206 101 237 451 187 123 77 28.3 76 Mongolia . . , . .. . . . . . , (.) 0.1 Uppermiddle-income 1,7501 1,9921 1,7681 1,9701 1,681 I 2,171 I 2,2431 4.8 iv 0.3 iv 77 Chile 8 -27 -10 -7 -9 (.) 2 02 (.) 78 Brazil 113 107 85 235 208 101 161 1.2 0.1 79 Portugal 68 136 113 82 49 45 98 9.6 0.5 80 Malaysia 80 125 135 143 135 177 327 21.4 1.1 81 Panama 29 35 46 39 41 47 72 33.8 1.7 82 Uruguay 11 14 10 8 4 3 4 1.3 0.1 83 Mexico 18 75 56 100 140 132 83 11 0.1 84 Korea, Rep. of 164 134 139 331 34 8 -37 -0.9 0.0 85 Yugoslavia -45 -29 -17 -15 -8 3 3 0.1 0.0 86 Argentina 29 43 18 44 30 48 49 1.6 0.1 87 South Africa . . . . .. . . . , . . , . . 88 Algeria 133 102 176 163 137 150 122 5.8 0.2 89 Venezuela -15 7 15 14 12 10 14 0.8 0.0 90 Greece 62 41 40 14 12 13 13 1.3 0.0 91 Israel 900 1,185 892 772 857 1,345 1,256 2984 63 92 Hong Kong 2 12 11 10 8 9 14 2.6 00 93 TrinidadandTobago 5 4 5 -1 6 6 5 3.9 0.1 94 Singapore 7 6 14 22 21 15 41 16.2 02 95 Iran, Islamic Rep. 128 6 31 9 3 48 13 0.3 96 Iraq 53 18 8 9 6 13 4 0.3 High-income oil exporters 74 I 1911 2211 2811 2131 1301 1211 6.5w 0.1 iv 97 Oman 40 165 174 231 132 71 72 63.6 10 98 Libya 12 5 17 11 12 6 5 1.4 () 99 Saudi Arabia 15 11 16 30 57 44 36 3.2 (.) 100 Kuwat 3 2 10 9 6 5 5 2.7 (.) 101 United Arab Emirates 4 7 4 1 5 4 3 2.6 (.) Industrial market economies 102 Spain 103 Ireland 104 Italy 105 New Zealand 106 United Kingdom 107 Belgium 108 Austria 109 Netherlands 110 France 111 Japan 112 Finland 113 Germany, Fed. Rep 114 Denmark 115 Australia 116 Sweden 117 Canada 118 Norway 119 United States 120 Switzerland East European nonmarket economies 121 Hungary 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Oem. Rep. 127 Romania 128 USSR 221 Table 22. Central government expenditure Percentage of total expenditure Housing; Total amenities; expenditure Overall social security Economic (percentage of surplus/deficit Defense Education Health and weltare° services Othera GNP) (percentage of GNP) 1972b 1972b 1983° 1972° 1983c 1972b 1983° 1972b 1983° 1972b 1983c 1972° 1983° 1972b 1983° 1983° Low-incomeeconomies 17.2w 19.5w 12.7w 4.7w 4.6w 2.7w 7.3w 5.8 iv 22.8 iv 24.0 iv35.4 iv 43.3w 18.2w 16.3 iv -4.3w -6.6w China and India . . . . . . 0 . . . . . . . . . . Other low-income 17.2 ii' 18.5 iv 12.7 ii' 9.9w 4.6w 3.3 iv 7.3 ii' 8.1 iv 22.8 iv 23.8 ii' 35.4w 36.4w 18.2 a' 19.9 iv -4.3 iv -5.6w Sub-Saharan Africa 13.2 iv 10.3 iv 15.5 iv 15.9 iv 5.2 iv 4.5 iv 5.7 iv 5.0 iv 20.9 iv 21.5 iv 39.5w 42.8 iv 21.0 iv 20.1 iv iv -4.4w 1 Ethiopia 143 14.4 57 44 . . 229 383 13.7 . -1 4 2 Bangladesh 5.1 14 9 5.0 98 . 393 25.9 93 -1 9 3 Mali , 7,9 ,, 10.1 . . 2.5 ,. 4.6 . 7.1 . . 67.8 . . 68.9 . . -18,4 4 Zaire 111 79 15.2 16.3 2.3 32 20 04 133 16.8 56,1 55.4 386 275 -7.5 -3.0 5 Burkina Faso 11.5 207 20.6 196 8.2 68 6.6 8.0 155 163 37.6 28.6 109 13.6 0.3 09 6 Nepal 7,2 54 7.2 9.9 4.7 45 0,7 4,3 57.2 53 1 23.0 22.7 8.5 17.2 -1 2 -5.2 7 Burma 31.6 . . 15.0 . . 61 , 7,5 . . 20.1 . . 197 . . 20.0 ., -7,3 8 Malawi 3.1 6.2 15.8 134 55 68 5.8 1.3 33.1 35.2 367 37 1 22.1 32.0 -6.2 -7 7 9 Niger ,, ,, .. .. .. ,. .. .. .. .. 10 Tanzania 11.9 . 17.3 . 7,2 . 21 . . 39.0 22.6 197 . -5.0 11 Burundi 10,3 ,, 23.4 . 6.0 2.7 . . 33.9 . . 23.8 19.9 12 Uganda 23.1 17.0 15,3 129 53 46 7.3 2.6 12,4 95 36.6 534 21.8 4.5 -8.1 -1 2 13 Togo .. 6.8 .. 196 5.7 . 8.2 .. 182 .. 416 .. 34.1 .. -21 14 Central African Rep , , . . . . . , , , , , , . . , , , , , , 15 India . . 20.0 1.9 . 2.4 . 4.6 . . 24.1 . . 47.0 , 14,9 -7.0 16 Madagascar 3.6 9,1 42 . 9.9 405 327 . 20.8 -25 17 Somalia 233 55 ,. 7.2 19 21,6 .. 40.5 135 , 06 18 Benin .. .. . .. , ,. . . .. . 19 Rwanda 256 222 57 .. 2.6 220 21 9 .. 11 7 -25 20 China .. .. . .. .. .. . , .. . . 21 Kenya 60 13.8 21 9 20.6 7.9 7.0 39 0.7 30.1 24.6 30.2 33.3 21.0 26.6 -3.9 -5.1 22 Sierra Leone 4.2 . . 14.8 .. 6.2 15 . 32.1 . 41.2 . . 21 2 . . -13.8 23 Haiti . , , . . . . ,. , . 14.5 17.6 . . -32 24 Guinea , , , . . . . , , , . . . . , . , , . 25 Ghana 79 6.2 20.1 18 7 6.3 5.8 4,1 6.8 15.1 19.2 46.6 43.3 19.5 78 -5.8 -2.6 26 Sri Lanka 3.1 24 13.0 7.1 64 51 19.5 11.4 20.2 13 1 37 7 60.8 254 33.6 -5.3 -11.0 27 Sudan 24,1 9.5 9.3 6.1 54 1.3 1,4 2.3 15,8 235 44 1 573 192 169 -0.8 -46 28 Pakistan 399 34 8 1,2 31 11 1.0 3.2 9.3 21.4 280 332 238 16.5 17,8 -6.8 -62 29 Senegal .. 9.7 .. 176 . . 4.7 . . 8.6 . 192 . . 40.3 17.4 26.8 -0.8 -60 30 Afghanistan . , , , . . . . , . . , 31 Bhutan 32 Chad 24.6 14.8 4,4 . . 1.7 21 8 32.7 181 .. -3.2 33 Kampuchea, Gem. 34 Lao PDR 35 Mozambique 36 V/el Nam Middle-income economies 15.1 ii' 11.4 ii' 12.8 ii' 12.1 w 6.3 iv 4,5w 20.0 a' 17.0w 24.3 ii' 21.9 iv 21.5 iv 33.1 iv 20.0 iv 26.2 iv -3.0 ii' -5.8 iv Olt exporters 22.5 iv 15.4iv 14.5 ii' 12.8w 3.9w 3.7w 4.3 iv 9.3 iv 26.5 ii' 25.7 iv 28.3w 33.1 iv 16.7w' 26.7w -2.4 iv -4.0w Oil importers 14.3w 14.4iv 11.9w 10.9 iv 6.9w 4.8 iv26.8 iv 21.2 w21.9 w 19.8 a' 18.2w 28.9w 21.4w' 25.1 iv -3.2w -5.7 iv Sub-Saharan Africa .13.2 iv 9.1 ii' 17.2 u 4,9 a' , 6.3w 4,3w 8.4 iv 21.6 iv 24.0w 47.0 iv 30.9 iv 13.1 iv 32.4w -2.5 iv -5.4w Lowermiddle-income 18.4 a' 15.5 iv 16.4 iv 15.0 iv 4.1 iv 4.2w 5.5 a' 7.6 w30.3 iv 26.5 w25.3 w 31.2w 16.8w 24.4w -2.4w -4.7w 37 Mauritania . . . . . . . . . . . . . . 38 Liberia , 7.9 , 158 . 7.3 , , 2.7 . 286 . . 377 . . 34,9 . . -106 39 Zambia . . . 19.0 152 74 8.4 1.3 1.8 26.7 239 457 507 34.0 41.5 -13.8 -19.8 40 Lesotho . . . 19.5 174 80 72 6.5 1.3 24.5 294 41.5 44 7 16.6 27.6 -0.9 -28 41 Bolivia 162 108 30.6 26.9 8.6 31 29 18.0 12.4 129 29.3 283 92 11.3 -1,4 -6.8 42 Indonesia 185 11 7 7.5 9,4 1.3 2.2 0.9 14 30.4 37,8 41.4 37.4 16,2 24.0 -2.6 -2.8 43 yemen Arab Rep. 36 7 166 ,, 4,9 , 8.7 ,, 33.1 432 , -24.6 44 Yemen, PDR .. ,, . .. .. .. .. .. .. .. .. .. 45 Cotecflvoire . . . . . , . , . . 46 Philippines 10.9 136 163 25.6 3.2 6.8 4,3 4,9 17.6 44.6 47,7 4.5 134 11.8 -2.0 -2.0 47 Morocco 123 146 192 18,6 4,8 2.9 84 71 256 28.8 297 279 224 332 -3.8 -80 48 Honduras 12,4 223 102 , , 87 . 28.3 . 18.1 , , 153 . -2.7 49 El Salvador 6.6 158 214 166 109 84 7.6 47 144 213 390 331 128 174 -10 -5.5 50 Papua New Guinea 4.2 . .. 209 . .. 93 . . 1.8 .. 19.6 44.2 . . 36.2 .. -4 7 51 Egypt, Arab Rep 15.7 ,. . 107 . . 2.8 . 14.9 . . 86 . 473 , , 39.0 -82 52 Nigeria 40.2 45 36 0.8 196 . 31 4 102 -09 53 Zimbabwe 18.3 . , 21 5 , 61 78 209 254 363 -6.9 54 Cameroon .. 9.6 . 132 . 3.7 . , 8.5 . 26.0 390 ,, 21,8 . . 1.3 55 NiCaragua 12.3 16.6 40 . 16,4 27.1 . . 23.6 155 492 -4.0 -268 56 Thailand 20.2 198 19.9 20.7 3.7 51 7.0 4.6 25.6 21.8 23.5 28.0 17.2 19.6 -4.3 -4.2 57 Botswana 7.0 10,0 .19.4 6.0 5.6 21 7 9.1 28.0 27.4 34.5 31,5 337 447 -23.8 11.5 58 Dominican Rep 8.5 87 14,2 15.3 11 7 10.5 11.8 14.7 35.4 29.7 18.4 21.0 185 156 -02 -28 59 Peru 14,8 27.6 227 185 6.2 6.2 2.9 08 303 . 23,1 46.9 17 1 186 -11 60 Mauritius 0.8 09 135 156 103 78 180 211 139 92 43.4 45,3 163 28 7 -1 2 -93 61 Congo, People's Rep. . .. .. . . . , 439 .. -30 62 Ecuador 15 7 10.6 275 26.0 45 75 0.8 1,3 28.9 13.9 22.6 407 13.4 143 0.2 -2.7 63 Jamaica ... .. .. .. .. .. . .. .. .. .. 64 Guatemala 11 0 194 95 ,, 10,4 .. 23.8 25.8 .. 9.9 13 1 -2.2 -3.6 65 Turkey 15.4 13.2 18,2 12.5 3.3 1.8 3.3 2.0 41.9 31.8 17.9 38.7 21.8 24.3 -2.1 -4.2 Note: For data comparability and coverage, see the technical notes. 222 Percentage of total expenditure Housing; Total amenities; expenditure Overall social security Economic (percentage of surplus/deficit Defense Education Health and weltaree services Othere GNP) (percentage of GNP) l972t 1983C 1972b 1983' 1972b 1983c 1972b 1983C 1972b 1983c 1972b 1983C 1972r 1983C l972b 1983C 66 Costa Rica 2.8 3.0 28.3 194 38 225 26.7 17 1 21.8 20.2 16,7 1 7.8 18,9 26.4 -4.5 -22 67 Paraguay 13.8 12.5 12.1 12.0 3.5 3.7 18.3 32.2 19.6 14.0 32.7 25.7 131 11.7 -1.7 0.4 68 Tunisia 4.9 . 30.5 7.4 8.8 . 23.3 25.1 . 22.8 37.1 -0.9 -5.1 69 Colombia . .. . ,. . 13.0 -25 70 Jordan 25.6 11.5 3.6 13 7 33 2 12.3 . 463 . -7 7 71 Syrian Arab Rep. 37,2 .. 11,3 1.4 .. 3.6 39.9 .. 6.7 28.1 -34 72 Angola 73 Cuba 74 Korea, Dem, Rep. 75 Lebanon 76 Mongolia Upper middle-income 14.0w 9.8w 11.5 w 11.0 iv 7.0w 4.7w 24.9 w 20.6 w 22.3w 20.2 w 20.3w 33.7w 21.3 iv 26.9 w -3.3 iv -6.2 iv 77 Chile 6.1 12.0 14.3 13.7 8.2 6.0 39.8 45.7 15.3 6.3 16.3 16.3 42.3 348 -13.0 -2.9 78 Brazil 8.3 4.1 6.6 3.7 6.4 7.3 36.0 35.1 24,6 238 17.9 25.9 17.8 21.4 -0.4 -3.6 79 Portugal 80 Malaysia 185 234 68 44 105 142 327 277 -98 81 Panama 20.7 11.0 15.1 13.1 10.8 12.2 24.2 13.5 29.1 50.2 27.6 404 -6.5 -12.1 82 Uruguay 56 12.7 95 6.5 1.6 3.4 52.3 52.1 9.8 87 21.2 16.5 25.0 25.9 -2.5 -4 1 83 Mexico 42 20 164 11.0 51 12 25.0 12.5 342 26.2 15.2 472 120 27.9 -30 -8.5 84 Korea, Rep. of 25.8 31.9 15.9 20.5 1.2 1.6 5.8 5.9 25.6 13.6 25.7 265 18.1 18.3 -39 -1.1 85 Yugoslavia 20.5 .. .. .. 24.8 .. 356 .. 12.0 .. 7.0 . 211 -0.4 86 Argentina 8.8 9.1 8.8 7.6 2.9 1.4 23.5 339 14.7 22.7 41.2 25.2 16.5 22.3 -3.4 -130 87 South Africa 21 8 28.0 -4.2 -4.1 88 Algeria 89 Venezuela 103 5.2 186 19 1 11.7 8.6 92 97 254 206 24.8 36.9 21.3 27.4 -03 -3.4 90 Greece 14.9 . 90 . 7.3 . . 30.2 . . 26.4 . 12.3 .. 27.5 . -1.7 91 Israel 39.8 29.0 9.0 8.4 3.5 4.3 7.8 21.5 16.3 64 23.5 30.4 44.0 48.8 -16.3 -18.6 92 Hong Kong 93 Trinidad and Tobago 94 Singapore 35.3 18.5 15.7 21.6 78 64 3.9 5.6 9.9 14.3 27.3 337 168 23.7 1.3 1.5 95 Iran, /slamic Rep 24.1 8.7 104 13.9 3.6 5.7 6.1 13.3 30.6 230 25.2 354 30.8 28.1 -4.6 -6.1 96 Iraq High-income oil exporters 13.0 ii' 27.7 iv 13.6 iv 9.4 iv 5.6w 6.0 ri' 14.9w 12.1 ii' 17.8w 21.9 w35.1 w 22.9 w24.2 iv 30.9w 9.2w 97 Oman 39.3 51.3 37 7.4 5.9 3.5 3.0 1.9 24.4 21.6 23.6 14.3 62.1 54.3 -15.3 -10.1 98 Libya . .. .. .. .. .. .. .. .. .. .. .. 99 Saudi Arabia .. . .. . . .. .. .. .. .. . . .. .. .. 100 Kuwait 8.4 13.3 150 10.1 5.5 6.2 14.2 15.5 16.6 28.7 40.1 26.2 344 39.2 17.4 6.2 101 United Arab Emirates 24.5 43.2 16.2 98 45 77 64 5.2 18.2 7.0 30.2 272 4.3 16.5 0.3 Industrial market economies 20.8 iv 14.3 ii' 5.4w 4,7 iv 10.0 iv 11.2 iv 37.2 iv 41.1 w 12.0 iv 9.2 iv 14.6 iv 19.5 ii' 22.9 iv 30.0 iv -1.6 iv -5.8 ii' 102 Spain 6.5 4.4 8.3 6.0 0.9 0.6 49.8 64.2 17.5 101 17.0 14.8 198 31.5 -0.5 -6.3 103 Ireland 330 581 -5.5 -136 104 Italy 6.3 3.5 16.1 8.6 13.5 11.5 448 34.3 18.4 6.1 0.9 36.0 31.8 52.8 -9.4 -13.4 105 NewZealand 5.8 4.9 16.9 11.9 14.8 12.6 25.6 30.2 16.5 17.6 20.4 22.7 28.5 41.7 -3.8 -95 106 United Kingdom 167 . . 2.6 122 265 . . 11.1 308 327 41.4 -27 -50 107 Belgium 6.7 5.2 15.5 13.9 1.5 1.7 41.0 42.8 18.9 163 164 20.1 392 56.7 -4.3 -129 108 Austria 32 3.2 10.2 9.6 101 11.5 53.7 48.6 11.2 13.2 11.5 13.9 29.7 39.9 -0.1 -5.4 109 Netherlands 5.3 .. 11.2 .. 11.3 . 412 . 100 210 408 594 -7.7 110 France 7.3 . . 8.2 .. 14.6 .. 47.6 . 6.9 .. 15.4 32.5 44.8 0.7 -3.6 111 Japan 12.7 186 112 Finland 61 5.5 15.3 138 10.6 10.6 28.4 32.0 27.9 25.1 11.6 13.0 24.8 31.6 1.3 -30 113 Germany, Fed. Rep. 12.4 9.3 1.5 0.8 17.5 18.6 46.9 50.3 11.3 7.0 10.4 13.9 24.2 31.1 0.7 -2.0 114 Denmark 72 . . 15.9 . . 10.0 . 41.4 . 11.9 .. 13.6 .. 328 46.6 27 -7.5 115 Australia 14 1 97 4.4 79 8.2 71 21 0 300 13 1 8.4 39.2 37.0 19.8 26.7 -0.5 -2.5 116 Sweden 12.5 6.9 14.8 9.2 3.6 1.5 443 49.4 106 9.3 14.3 23.7 280 46.9 -1 2 -10.1 117 Canada 8.0 .. 3.6 . . 6.3 . . 37.6 .. 16.7 . 27.8 . 25.6 . . -6.5 118 Norway 9.7 8.6 9.9 8.8 12.3 10.6 39.9 36.2 20.2 20.5 80 153 35.0 39.7 -1.5 1.9 119 United States 32.2 23.7 32 19 8.6 10.7 353 36.3 10.6 8.8 10 1 18.6 194 253 -1.6 -6.1 120 Switzerland 151 10.4 4.2 31 100 134 395 497 184 126 128 10.8 133 194 0.9 -03 East European nonmarket economies 121 Hungary 55.2 .. 0.4 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Oem. Rep. 127 Romania 55 .. 2.5 08 249 504 158 274 32 128 USSR a. See the technical notes b. Figures in italics are for 1973. not 1972. c. Figures in italics are for 1982, not 1983. 223 Table 23. Central government current revenue Percentage of total current revenue Tax revenue Total Taxes on Domestic Taxes on Current income, Social taxes international Current revenue profit, and security on goods trade and nontax (percentage Capital gain contributions and services transactions Other taxes° revenue of GNP) 1972b 1983° 1972b 1983° 1972b' 1983° 1972b 1983C 1972b 1983C 1972b 1983° 1972b 1983° Low-income economies 18.6 ü' 17.7w 27.3w 37.5w 34.1 w 26,7w 3.6w 1.4w 16.4w 16.7w 14.2w 13.6w China and India . Other low-income 18.6 a' 18.7 a' 27.3 w 29.7 a' 34.1 a' 32.6 a' 3.6w 3 1 a' 16.4 a' 15.9 a' 14.2 a' 14.7 a' Sub-Saharan Africa 21.5 u' 22.8 w 24.4 u' 25.2 a' 38.3w 32.8 a' 4.6 a' 5.1 a' 11.2 a 14.1 w 16.6 a' 14.6w 1 Ethiop:a 23.0 . . .. .. 29.8 . . 30.4 .. 5.6 .. 11.1 . . 10.5 2 Bangladesh 3.7 .. .. .. 22.4 . . 18.0 .. 3.8 .. 52.2 .. 8.5 3 Mali . . 15.5 . . 5.4 .. 35.2 .. 21.2 .. 11.7 . . 11.0 . . 29.0 4 Zaire 22.2 30.6 2.2 1.1 12.7 24.4 57.9 28.8 1.4 3.4 3.7 11.7 27.9 20.2 5 BurkinaFaso 18.6 16.1 . . 8.8 19.9 15.7 50.1 35.5 3.5 16.3 7.9 7.7 10.1 14.5 6 Nepal 4.1 7.2 .. . . 26.5 38.5 36,7 31.3 19.0 7.1 13.7 15.9 5.2 8.7 7 Burma 28.7 3.2 .. .. 34.2 39.5 13.4 19.2 (.) (.) 23.8 38.2 12.4 16.2 8 Malawi 31.4 33.6 .. . . 24.2 30.9 20.0 21.0 0.5 0.6 23.8 13.9 16.0 21.5 9 Niger .. .. .. .. .. .. .. .. .. 10 Tanzania 29.9 , , .. 29.1 . . 21.7 . . 0.5 .. . 18.8 .. 15.8 11 Burundi 18.1 . . 1.2 19.8 . . 38.7 . . 15.6 . . 6.5 . . 11.5 12 Uganda 22.1 4.1 .. .. 32.8 26.5 36.3 67.1 0.3 (.) 8.5 2.3 13.7 3.2 13 Togo .. 34.0 .. 5.4 .. 14.7 .. 28.2 . . 1.3 . . 16.4 . . 29.5 14 Central African Rep. .. .. .. .. .. .. .. .. .. .. .. 15 India . . 17.2 . . . . . . 41.1 . . 24.0 . . 0.5 . . 17.1 . . 13.1 16 Madagascar 13.1 15.5 7.2 13.7 29.9 41.7 33.6 22.2 5.5 3.3 10.8 3.6 18.3 13.7 17 Somalia 10.7 .. .. .. 24.7 .. 45.3 . . 5.2 .. 14.0 . . 13.7 18 Benin .. .. .. .. .. .. .. .. .. .. .. 19 Rwanda 17.9 . . 4.4 .. 14.1 .. 41.7 . 13.8 .. 8.1 . . 9.2 20 China .. .. .. .. .. .. .. .. .. .. 21 Kenya 35.6 28.6 . . . . 19.9 36.8 24.3 21.3 14 ft6 18.8 12.7 18.0 21.6 22 Sierra Leone . . 27.4 .. . . .. 24.6 .. 36.6 . . 3.3 .. 8.1 .. 7.9 23 Haiti . . 17.9 .. 0.3 .. 19.1 . . 26.2 . . 27.8 .. 8.7 . . 13.9 24 Guinea . . 21.1 .. 4.8 .. 1.4 . . 37.7 . . 0.7 . . 34.5 . . 23.1 25 Ghana 18.4 17.0 .. . . 29.4 17.0 40.6 49.0 0.2 0.1 11.5 16.9 15.1 5.4 26 SriLanka 19.1 14.0 ., . . 34.7 40.1 35.4 31.5 2.1 1.7 8.7 12.7 20.1 20.2 27 Sudan 11.8 15.8 . 30.4 14.1 40.5 49.7 1.5 0.7 15.7 19.7 18.0 11.8 28 Pakistan 13.6 15.2 .. . . 35.9 32.5 34.2 32.7 0.5 0.3 15.8 19.3 12.3 14.5 29 Senegal 17.6 19.0 .. 3.5 24.5 29.1 30.9 34.7 23.8 5.9 3.2 7.8 16.8 19.6 30 Afphanistan .. .. .. .. .. 31 Bhutan .. .. .. .. .. .. .. .. .. .. 32 Chad 16.7 . . .. .. 12.3 .. 45.2 . . 20.5 .. 5.3 . . 13.1 33 Kampuchea, Dem. . . . . .. .. .. . . . . . . .. .. . . 34 Lao PDR .. .. .. .. .. 35 Mozambique .. . . .. .. .. . . . . , , .. 36 VietNam .. .. .. .. .. .. Middle-income economies 25.5 a' 27.4 a' 26.5 a' 26.5 a' 13.5 a' 10.4 a' 18.3 a' 12.2 a' 17.2 U' 23.5 a' 17.9 U' 23.1 a' Oil exporters 29.3 w 44.7 a' 24,4w' 15.5w 20.7w 11.7 a' 7.9w 10.2 a' 17.7 a' 17.9 a' 15.5 a' 24.9 a' Oil importers 23.3 a' 25.2 a' 29.6 a' 30.1 i 12.7 a' 9.6 a' 21.5 a' 17.0 a' 12.9 a' 18.1 a' 19.0 a' 23.2 Sub-Saharan Africa 42.3 a' 42.5 a' 25.0 a' 24.0 U' 18.7 a' 20.1 a' 0.5 a' 3.6 U' 13.5 a' 9.8 a 13.2 a' 27.5 a' Lower middle-income 26.5 a' 37.7 a' . . . . 28.6 a' 23.3 U' 20.0 u' 14.6 a' 10.2 a' 8.6w 14.7 a' 15.8 a' 15.1 a' 20.9 a' 37 Mauritana . . . . . . , . . , . . . . . . . . . . . . . . , 38 Liberia . . 39.6 .. .. .. 27.0 .. 28.0 .. 2.4 .. 3.0 .. 23.1 39 Zambia 49.7 32.9 .. 20.2 48.3 14.3 8.8 0.1 3.2 15.6 6.6 23.2 24.6 40 Lesotho 14.3 10.1 .. .. 2.0 10.1 62.9 69.0 9.5 1.1 11.3 9.7 11.7 23.7 41 Bolivia 14.5 13.3 .. 28.2 28.4 25.4 46.0 16.1 5.3 4.8 5.7 12.2 7.8 4.4 42 Indonesia 45.5 73.6 .. .. 22.7 10.3 17.5 4.3 3.6 1.3 10.6 10.5 14.4 22.7 43 YemenArabRep. . . 11.2 .. .. .. 6.5 . . 50.2 .. 15.2 . . 16.9 .. 22.5 44 Yemen, PDR .. .. .. .. .. .. .. .. .. .. .. 45 Coted'lvoire .. .. .. .. .. , , . . . . .. .. . . .. 46 Philippines 13.8 19.3 .. .. 24.3 37.7 23.0 26.8 29.7 3.6 9.3 12.6 12.4 11.9 47 Morocco 16.4 17.7 5.9 4.8 45.7 36.8 13.2 18.4 6.1 7.2 12.6 15.1 18.1 25.1 48 Honduras 19.2 .. 3.0 .. 33.8 .. 28.2 .. 2.3 .. 13.5 .. 12.5 49 ElSalvador 15.2 19.9 .. .. 25.6 40.3 36.1 23.0 17.2 5.8 6.0 10.9 11.6 12.3 50 PapuaNewGuinea . . 48.3 .. .. .. 13.5 .. 23.0 .. 1.6 . . 13.7 .. 21.8 51 Eqypt,ArabRep. . . 17.8 . . 11.1 .. 12.5 . . 16.2 . . 6.3 .. 36.1 .. 36.9 52 Nigeria 43.0 .. . . .. 26.3 .. 17.5 .. 0.2 . . 13.0 . . 11.6 53 Zimbabwe . . 41.9 .. . . .. 31.9 .. 15.0 .. 0.9 . . 10.3 .. 32.6 54 Cameroon .. 59.3 .. 5.9 . , 10.5 . . 19.1 .. 1.9 .. 3.4 .. 24.2 55 Nicaragua 9.6 11.3 14.0 10.2 37.4 41.1 24.3 16.1 8.9 13.4 5.8 7.8 12.6 34.0 56 Thailand 12.1 19.6 . . . . 46.3 47.3 28.7 21.4 1.8 2.1 11.2 9.5 12.9 15.2 57 Botswana 19.9 27.1 .. .. 2.4 2.0 47.2 31.1 0.4 0.1 30.0 39.7 30.7 56.4 58 Dominican Rep. 17.9 19.8 3.9 4.4 19.0 30.8 40.3 26.3 1.8 2.2 17.0 16.5 17.9 12.7 59 Peru 17.5 15,3 .. .. 32.2 44.8 15.7 24.6 22.1 5.8 124 9.6 16.0 17.8 60 Mauritius 22.7 14.1 .. .. 23.3 18.8 40.2 50.6 5.5 3.4 8.2 13.1 15.6 22.4 61 Conqo, People's Rep. 19.3 .. .. .. 40.3 .. 26.5 .. 6.4 .. 7.4 . . 18.4 62 Ecuador 19.6 55.7 .. .. 19.1 20.1 52.4 21.1 5.1 2.4 3.8 0.7 13.6 11.6 63 Jamaica .. .. .. .. .. , .. .. .. .. .. .. 64 Guatemala 12.7 11.8 .. 11.7 36.1 3.1 26.2 15.0 15.6 13.7 9.4 14.8 8.9 10.2 65 Turkey 30.8 48.2 .. .. 31.1 23.3 14.5 7.2 6.1 5.5 17.6 15.9 19.7 20.1 Note: For data Comparability and coverage, see the technical notes. 224 Percentage of total current revenue Tax revenue Total Taxes on Domestic Taxes on Current income, Social taxes international Current revenue profit, and security on goods trade and nontax (percentage capital gain contributions and services transactions Other taxes revenue of GNP) l972i 1983C 1972b 1983C 1972r 1983' 1972' 1983' 1972b 1983C 1972b 1983c 1972b 1983C 66 Costa Rica 17.7 16.9 13.4 25.2 381 31.0 180 224 1.6 -0.2 11.2 4.7 15.8 24.3 67 Paraguay 8.8 15.4 10.4 12.9 26.2 21.4 24.8 14.6 17.0 21.9 12.8 13.9 11.5 11.6 68 Tunisia 15.9 147 7.1 8.9 31.6 21.0 21 8 273 7.8 44 157 236 233 340 69 Colombia 372 139 .. 16.0 . . 20.3 ,, 7.2 . 55 106 70 Jordan 123 . . . . . . 11 2 . 37.2 . . 12.0 , , 27.3 266 71 Syrian Arab Rep. 6.8 10.4 173 12.1 534 245 72 Angola 73 Cuba 74 Korea, Oem. Rep. 75 Lebanon 76 Mongolia Upper middle-income 25.1 w 23.8w 19.2w 12.0w 25.9w 27.7 iv 11.4w 8.9 iv 0.4 iv 1.4w 18.0w 26.2 iv 19.1 iv 24.1 iv 77 Chile 12.9 14.3 27 1 83 286 393 10.0 6.9 4.3 9.9 17.1 21.2 30.2 30.0 78 Brazil 18.3 15.1 27,4 24.6 376 25.3 7.0 4.1 3.7 42 6.0 26.8 19.0 266 79 Portugal . . . . . . . . . .. . . . . . . . . 80 Malaysia 262 0.1 . 21.2 . . 29.0 . . 15 .. 22.1 .. 20.4 81 Panama 23.3 22.5 22.4 21.8 13.2 14.8 16.0 10.0 7.7 3.5 17.3 27.4 21.8 30.2 82 Uruguay 4.7 8.3 30.0 24.0 245 392 61 11 7 22.0 6.9 126 98 22.7 22.4 83 Mexico 36.4 22.2 19.4 11.0 32.1 63.2 13.2 6.9 -9.8 17.6 8.6 143 104 20.2 84 Korea, Rep of 292 229 0.8 1.2 41 7 45.7 107 15.8 5.2 3.9 12.3 10.6 132 19.5 85 Yugoslavia , . . . 52.3 245 .. 19.5 . . . . 37 . 20.7 86 Argentina 7.4 4.3 259 169 148 38.5 18.5 16.2 -37 11 5 37.0 12.6 13.1 15.2 87 SouthAtrica 54.8 52.3 1.2 1.3 21.5 27.9 4.6 4.9 49 3.0 12.9 10.7 21.2 25.6 88 Algeria .. . . . . .. . . . . . . . .. 89 Venezuela 54.2 56.1 6.0 3.8 67 6.0 6.1 18.0 1.1 0.9 25.9 15.3 21.8 27.0 90 Greece 12.2 . 24.5 . . 355 . . 6.7 . . 12.0 . 9.2 25.4 91 Israel 36.2 41.5 . . 9.5 23.0 28.1 21 6 5.6 68 55 12.4 9.9 31.8 300 92 Hong Kong .. . . . . . . . .. . . . . . . 93 Trinidad and Tobago . . .. .. .. .. . , 94 Singapore 24.4 33.0 .. . . 17.6 13.6 11.1 4.8 15.5 14.8 31 4 33.8 21.6 308 95 Iran, Islamic Rep 7.9 7.8 2.7 7.5 6.4 4.2 14.6 11.4 4.9 3.9 63.6 652 26.2 21 8 96 Iraq .. .. .. .. .. .. .. .. .. High-income oil exporters 336 97 Oman 71.1 26.5 0.6 30 20 23 04 23.6 705 474 445 98 Libya 99 Saudi Arabia 100 Kuwait 68.8 2.2 19.7 0.4 15 19 0.2 0.2 9.9 95.2 552 52.6 101 United Arab Emirates 0.2 Industrial market economies 38.9 ii' 36.3 iv 29.3 iv 34.1 iv 21.4 iv 18.1 ii' 1.7 iv 1.2 iv 2.3 iv 0.9 iv 6.4 iv 9.4w 2 .5w 27.0 ii' 102 Spain 15.9 21.7 38.9 46.2 234 15.4 10.0 4.2 07 31 11.1 9.5 20.0 26.4 103 Ireland 28 1 32.2 8.9 13.8 32.6 26.6 16.6 13 7 3.2 2.3 10.5 11 4 306 462 104 Italy 16.6 35.7 39.2 331 31.7 22.9 0.4 0.2 4.3 2.8 7.7 53 26.9 423 105 NewZealand 61.4 63.6 .. . 19.9 20.5 4.1 4.0 4.5 1.3 10.0 106 27.3 346 106 United Kingdom 39.4 38.7 15.1 17.7 27.1 28.6 17 (.) 5.5 3.0 11.2 12.0 33.5 376 107 Belgium 31.3 38.4 324 31.2 28.9 244 10 (.) 3.3 1.9 3.1 4.1 350 44.6 108 Austria 20.6 200 303 359 28.2 26.1 53 1.4 10.1 84 5.5 8.2 298 34 9 109 Netherlands 325 24.3 367 41 4 22.3 19.8 05 (.) 3.4 2.1 4.7 12.4 432 532 110 France 16.9 17.7 37.1 442 37.9 29.5 0.3 (.) 2.9 3.5 4.9 5.1 33.5 41.7 111 Japan , . , . . . 112 Finland 30.0 293 78 90 47 7 48.8 31 13 5.8 3.2 5.5 84 27 1 28 6 113 Germany, Fed, Rep. 19.7 17.0 46.6 551 28.1 220 0.8 (.) 08 0.1 4.0 58 25.2 29.3 114 Denmark 40.0 337 5.1 4.9 42.1 446 31 08 28 3.0 68 13 1 355 37.9 115 Australia 58.3 61.7 .. . . 21.9 23.3 5.2 47 21 0.2 12.5 10.0 21.4 24.9 116 Sweden 27.0 14.5 21.6 34.1 34.0 29.0 1.5 0.6 4.7 5.7 11.3 16.1 32.5 39.6 117 Canada . 48.3 14 1 ,. 19.2 48 -01 .. 13.6 .. 20.0 118 Norway 225 25.1 205 239 479 38.7 1.6 05 10 10 66 107 370 438 119 United States 59.4 49.9 23.6 31.3 7.1 54 1.6 1.3 2.5 09 57 11.1 180 19 7 120 Switzerland 13.9 14.2 37.3 49.3 21 5 194 16.7 8.3 2.6 3.1 8.0 5.7 14.5 19 1 East European nonmarket economies 121 Hungary 17.7 . . 174 . . 387 7.1 . . 7.2 11.9 . . 55.4 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Dem. Rep. 127 Romania 18.3 .. .. , .. 13.1 68 7 30.6 128 USSR a. See the technical notes. b. Figures in italics are for 1973, not 1972. c. Figures in italics are for 1982, not 1983. 225 Table 24. Income distribution Percentage share of household income, by percentile groups of householdse Lowest Second Third Fourth Highest Highest Year 20 percent quintile quintile quintile 20 percent 10 percent Low-income economies China and India Other low-income Sub-Saharan Africa 1 Ethiopia 2 Bangladesh 1976-77 6.2 10.9 15.0 21.0 469 320 3 Mali 4 Zaire 5 Burkina Faso 6 Nepal 7 Burma 8 Malawi 9 Niger 10 Tanzania 11 Burundi 12 Uganda 13 Togo 14 Central African Rep. 15 India 1975-76 70 92 139 205 494 336 16 Madagascar 17 Somalia 18 Benin 19 Rwanda 20 China 21 Kenya 1976 2.6 6.3 11.5 19.2 60.4 45.8 22 Sierra Leone 23 Haiti 24 Guinea 25 Ghana 26 Sri Lanka 1969-70 75 11.7 15.7 21,7 43 4 28.2 27 Sudan 28 Pakistan 29 Senegal 30 Afghanistan 31 Bhu(an 32 Chad 33 Kampuchea, Oem 34 Lao PDR 35 Mozambique 36 Viet Nam Middle-income economies Oil exporters Oil importers Sub-Saharan Africa Lower middle-income 37 Mauritania . . . . , . S S 38 Liberia . . . . . . 39 Zambia 1976 3.4 7.4 11.2 16.9 61.1 46.3 40 Lesotho . . . 41 Bolivia 42 Indonesia 1976 6.6 7.8 12.6 23.6 49.4 34.0 43 Yemen Arab Rep. .. . . . . .. 44 Yemen, PDR .. .. ,. 45 Coted'Ivoire .. .. ,, , 46 Philippines 1970-71 5.2 9.0 12.8 190 54.0 38.5 47 Morocco 48 Honduras . . . , ,. 49 El Salvador 1976-77 5.5 10.0 14.8 22.4 47.3 29.5 50 Papua New Guinea . . . . . 51 Egypt, Arab Rep 1974 5.8 10.7 14.7 20.8 48.0 33.2 52 Nigeria . .. .. .. . 53 Zimbabwe .. .. . . 54 Cameroon .. . . . . .. 55 Nicaragua .. 56 Thailand 1975-76 56 96 13.9 211 498 34 1 57 Botswana , , . 58 Dominican Rep. .. . ' 59 Peru 1972 1.9 5.1 11.0 21 0 61.0 42.9 60 Mauritius 1980-81 4.0 7.5 11.0 170 60.5 46.7 61 Congo, People's Rep. . . . . . 2 Ecuador .. .. ,, ,. . . 63 Jamaica .. .. . . .. 64 Guatemala .. . . . . .. . 65 Turkey 1973 35 8.0 12.5 195 56.5 40.7 Note' For data comparability and coverage, see the technical notes 226 Percentage share of household income, by percentile groups of household? Lowest Second Third Fourth Highest Highest Year 20 percent quintite quintile quintile 20 percent 10 percent 66 Costa Rica 1971 3.3 8.7 133 19.9 54.8 39.5 67 Paraguay 68 Tunisia 69 Colombia 70 Jordan 71 Syrian Arab Rep. 72 Angola 73 Cuba 74 Korea, Dem, Rep. 75 Lebanon 76 Mongolia Upper middle-income 77 Chile 78 Brazil 1972 20 5.0 94 17.0 66.6 50 6 79 Portugal 1973-74 5.2 10.0 14.4 21 3 49.1 33,4 80 Malaysia 1973 3.5 7.7 12.4 20.3 56.1 39 8 81 Panama 1970 2.0 5.2 11.0 20 0 61.8 44 2 82 Uruguay 83 Mexico 1977 2.9 7.0 12.0 20.4 57.7 40.6 84 Korea, Rep. ot 1976 57 11.2 15.4 22.4 45.3 27.5 85 Yugoslavia 1978 66 12.1 18.7 23.9 38.7 229 86 Argentina 1970 44 9.7 141 21.5 50.3 35.2 87 South Africa .. , . , , 88 Algeria .. .. , , . 89 Venezuela 1970 3.0 7.3 12.9 22.8 54.0 357 90 Greece , .. . , .. 91 Israel 1979-80 60 120 177 24.4 39.9 22.6 92 HongKong 1980 5.4 10.8 15.2 21.6 47.0 31.3 93 TrinidadandTobago 1975-76 4.2 9.1 13.9 22.8 50.0 31.8 94 Singapore . . , . . .. , 95 Iran, Islamic Rep. .. . .. .. 96 Iraq . . . .. . . High-income oil exporters 97 Oman 98 Libya 99 Saudi Arabia 100 Kuwait 101 United Arab Emirates Industrial market economies 102 Spain 1980-81 69 12.5 17.3 23.2 40.0 24.5 103 Ireland 1973 7.2 13.1 16.6 23.7 39.4 25.1 104 Italy 1977 6.2 11.3 159 22.7 43.9 28.1 105 New Zealand 1981-82 51 10.8 162 232 44 7 28.7 106 United Kingdom 1979 70 11.5 17.0 248 39.7 23.4 107 Belgium 1978-79 79 13.7 18.6 23.8 360 21.5 108 Austria 109 Netherlands 1981 8.3 14.1 18.2 232 36.2 21 5 110 France 1975 5.3 11.1 16.0 21.8 45.8 30.5 111 Japan 1979 8.7 132 175 23.1 375 22.4 112 Finland 1981 6.3 12.1 18.4 25.5 37.6 21.7 113 Germany, Fed, Rep. 1978 7.9 12.5 17.0 231 39.5 24.0 114 Denmark 1981 5.4 12.0 18.4 25.6 38 6 22.3 115 Austraha 1975-76 5.4 10.0 15.0 22.5 47 1 30.5 116 Sweden 1981 7.4 13.1 16.8 21 0 41 7 28.1 117 Canada 1981 5.3 11.8 18.0 24.9 40 0 23.8 118 Norway 1982 60 129 18.3 24.6 38.2 22 8 119 UnitedStates 1980 5.3 119 17.9 250 39,9 23.3 120 Switzerland 1978 6.6 13.5 18.5 23.4 38.0 23.7 East European nonmarket economies 121 Hungary 1982 6.9 13.6 19.2 24.5 35.8 20.5 122 Poland 123 Albania 124 Bulgaria 125 Czechoslovakia 126 German Dam, Rep. 127 Romania 128 USSR a. These estimates should be treated with Caution. See the technical notes 227 Table 25. Population growth and projections Hypothetical Assumed Average annual growth size of year of of population Population stationary reaching net Population (percent) (millions) momentum population reproduction 1965-73 1973-84 1980-2000 1984 1990 2000 (millions) rate of 1 1985 Low-income economies 2.6w 2.0w 1.8w 2,364 t 2,641 t 3,132 China and India 2.5w 1.8w 1.5w 1,778 t 1,952 t 2,240 Other low-income 2.7w 2.6w 2.6w 586 t 689 t 892 Sub-Saharan Africa 2.7w 2.9w 3.1 w 258 t 308 t 416 1 Ethiopia 2.6 2.8 2.7 42 49 65 204 2040 1.9 2 Bangladesh 2.6 2.5 2.4 98 114 141 310 2030 1.9 3 Mali 2.6 2.6 2.6 7 9 11 36 2035 1.8 4 Zaire 2.4 3.0 3.2 30 36 47 130 2030 1.9 5 Burkina Faso 2.0 1.8 2.0 7 7 9 31 2040 1.8 6 Nepal 2.0 2.6 2.6 16 19 24 74 2040 1.8 7 Burma 2.3 2.0 2.1 36 41 49 87 2020 1.8 8 Malawi 28 3.1 3.2 7 8 11 38 2040 1.9 9 Niger 2.3 3.0 3.2 6 7 10 36 2040 19 10 Tanzania 3.2 3.4 3.5 21 27 37 123 2035 2.0 11 Burundi 1.4 2.2 3.0 5 5 7 24 2035 1.9 12 Uganda 3.6 3.2 3.3 15 18 26 84 2035 20 13 Togo 3.8 2.8 3.3 3 4 5 16 2035 2.0 14 Central African Rep. 1.6 2.3 2.8 3 3 4 12 2035 1.8 15 India 2.3 2.3 1.9 749 844 994 1,700 2010 1.7 16 Madagascar 2.4 2.8 3.1 10 12 16 48 2035 1.9 17 Somalia 3.5 2.8 3.0 5 6 8 30 2040 1.9 18 Benin 2.6 28 3.2 4 5 6 20 2035 2.0 19 Rwanda 3.1 33 36 6 7 10 40 2040 2.0 20 China 2.7 1.4 1.2 1,029 1,108 1,245 1,600 2000 1.6 21 Kenya 38 4.0 39 20 25 35 111 2030 2.1 22 Sierra Leone 1.7 2.1 24 4 4 5 17 2045 1.8 23 Haiti 1.5 1.7 1.8 5 6 7 14 2025 1.8 24 Guinea 1.8 20 2.1 6 7 8 24 2045 1.8 25 Ghana 2.2 2.6 3.5 12 15 20 54 2030 1.9 26 Sri Lanka 2.0 1.8 1.8 16 18 21 32 2005 1.7 27 Sudan 3.0 2.9 2.9 21 25 34 101 2035 1.9 28 Pakistan 3.1 2.9 2.6 92 108 138 353 2035 1.8 29 Senegal 2.4 28 29 6 8 10 30 2035 1.9 30 Afghanistan 2.3 . . .. .. .. 31 Bhutan 1.3 1.9 2.3 1 1 2 4 2040 1.8 32 Chad 1.9 2.1 2.5 5 6 7 22 2040 1.8 33 Kampuchea, Dem. 1.8 .. .. .. .. .. 34 Lao PDR 1.4 16 26 4 4 5 17 2040 1.8 35 Mozambique 2.3 2.6 3.0 13 16 21 67 2035 1.9 36 VietNam 3.1 2.6 25 60 70 88 167 2015 1.9 Middle-income economies 2.5w 2.4w 2.1 w 1,188 t 1,365 t 1,676 Oil exporters 2.6w 2.7w 2.4w 556 1 651 I 826 Oil importers 2.4 w 2.2w 1.8 w 632 I 712 I 850 Sub-Saharan Africa 2.6w 3.0w 3.3w 148 t 182 t 249 Lower middle-income 2.5 w 2.5w 2.3w 688 t 796 I 994 37 Mauritania 2.3 2.1 2.7 2 2 3 8 2035 1.8 38 Liberia 2.8 3.3 3.2 2 3 4 11 2035 1.9 39 Zambia 3.0 3.2 3.4 6 8 11 35 2035 1.9 40 Lesotho 2.1 2.4 2.6 1 2 2 6 2030 1.8 41 Bolivia 2.4 2.6 2.5 6 7 9 22 2030 1.9 42 Indonesia 2.1 2.3 1.9 159 179 212 361 2010 1.8 43 Yemen Arab Rep. 2.6 28 2.8 8 9 12 39 2040 1.9 44 Yemen, PDR 2.1 23 2.5 2 2 3 7 2035 1.9 45 Cole d'lvoire 4.6 4.5 3.7 10 13 17 46 2035 2.1 46 Philippines 2.9 2.7 2.2 53 62 76 137 2015 1.8 47 Morocco 2.7 2.4 2.4 21 25 31 66 2025 1.9 48 Honduras 2.9 3.5 30 4 5 7 15 2020 2.0 49 ElSalvador 3.4 3.0 2.7 5 6 8 16 2015 1.9 50 Papua New Guinea 2.3 2.6 2.1 3 4 5 11 2030 1.8 51 Egypt,ArabRep. 2.2 2.6 2.2 46 53 65 126 2020 1.8 52 Nigeria 2.5 2.8 3.4 96 118 163 528 2035 2.0 53 Zimbabwe 34 3.2 34 8 10 13 33 2025 2.0 54 Cameroon 2.4 3.1 3.3 10 12 17 51 2030 1.9 55 Nicaragua 3.2 3.0 2.9 3 4 5 12 2025 2.0 56 Thailand 2.9 2.2 1.7 50 56 66 101 2005 1.8 57 Botswana 3.3 4.4 3.4 1 1 2 5 2025 2.0 58 DominicanRep. 2.9 24 2.2 6 7 9 15 2010 1.9 59 Peru 2.8 2.4 2.2 18 21 26 46 2015 1.8 60 Mauritius 2.0 1.4 1.5 1 1 1 2 2010 1.7 61 Congo, People's Rep. 2.6 3.1 3.7 2 2 3 9 2025 1.9 62 Ecuador 3.2 2.9 2.3 9 11 13 26 2015 1.9 63 Jamaica 1.5 1.2 1.2 2 2 3 4 2005 1.7 64 Guatemala 2.8 2.8 2.6 8 9 12 27 2020 1.9 65 Turkey 2.5 2.2 2.0 48 55 65 109 2010 1.7 Note: For data comparability and coverage, see the technical notes 228 Hypothetical Assumed Average annual growth size of year of of population Population Population stationary reaching net (percent) (millions) population momentum reproduction 1965-73 1973-84 1980-2000 1984 lggOa 2000a (millions) rate of 1 1985 66 Costa Rica 3.0 2.9 2.1 3 3 3 5 2005 1.8 67 Paraguay 2.7 2.5 2.3 3 4 5 8 2010 1.9 68 Tunisia 2.0 2.4 2.3 7 8 10 18 2015 1.8 69 Colombia 2.6 2.0 1.8 28 31 37 59 2010 18 70 Jordan 30 2.8 4.0 3 4 6 17 2020 1.9 71 Syrian Arab Rep. 3.4 3.4 3.4 10 12 17 39 2020 1.9 72 Angola 2.1 3.1 2.7 9 10 13 43 2040 19 73 Cuba 1.8 0.7 1.0 10 10 11 14 2010 14 74 Korea, Dem. Rep. 2.8 2.6 2.1 20 23 28 46 2010 18 75 Lebanon 2.6 . . . 76 Mongolia 3.1 28 25 2 2 3 6 2020 1.9 Upper middle-income 2.4 u' 2.3 ii' 1.9 w 497! 566 I 679 1 77 Chile 1.9 1.7 1.4 12 13 14 20 2000 16 78 Brazil 25 23 20 133 150 179 293 2010 1.8 79 Portugal -0.2 10 06 10 11 11 13 2010 1.3 80 Malaysia 2.6 24 21 15 17 21 33 2005 1.8 81 Panama 2.8 2.3 1.6 2 2 3 4 2000 1.7 82 Uruguay 0.6 05 0.7 3 3 3 4 2000 1.3 83 Mexico 33 2.9 23 77 89 110 196 2010 1.9 84 Korea, Rep. of 2.2 1.5 1.4 40 44 49 66 2000 1.6 85 Yugoslavia 0.9 0.8 0.6 23 24 25 29 2010 1.3 86 Argentina 1.5 1.6 1 3 30 33 37 53 2020 15 87 South Africa 2.3 2.4 2.5 32 36 45 94 2025 18 88 Algeria 3.0 3.1 3.3 21 26 34 81 2025 19 89 Venezuela 3.5 3.3 2.6 17 20 24 39 2005 1.8 90 Greece 0.5 10 04 10 10 11 12 2000 12 91 Israel 3.1 22 1.7 4 5 5 8 2005 16 92 Hong Kong 2.0 24 1.2 5 6 6 7 2010 14 93 Trinidad and Tobago 1.3 1.5 1.6 1 1 1 2 2005 1.7 94 Singapore 1.8 1.3 1.0 3 3 3 3 2010 1.4 95 Iran, Islamic Rep. 3.3 3.1 3.1 44 53 71 162 2020 1.9 96 Iraq 3.3 3.6 3.5 15 19 26 71 2025 19 High-income oil exporters 4.5w 5.1w 3.7 u' 191 24! 33! 97 Oman 2.9 4.5 3.0 1 1 2 5 2030 1.9 98 Libya 4.1 4.1 4.0 3 4 6 17 2025 1.9 99 Saudi Arabia 4.0 4.9 3.7 11 14 20 61 2030 1.8 100 Kuwait 8.3 5.8 35 2 2 3 5 2010 1.8 101 United Arab Emirates 11.8 10.7 38 1 2 2 3 2010 1.4 Industrial market economies 1.0 ii' 0.7 w 0.5 iv 733 1 755 1 789 1 102 Spain 1.0 1.0 0.7 39 40 43 49 2010 1.3 103 Ireland 0.8 1.3 1.0 4 4 4 6 2005 14 104 Italy 0.6 03 02 57 57 59 57 2010 1.1 105 New Zealand 1.4 0.6 0.7 3 3 4 4 2000 13 106 United Kingdom 0.4 (.) 0.1 56 57 58 59 2010 1.1 107 Belgium 0.4 0.1 0.1 10 10 10 9 2010 11 108 Austria 0.4 0.0 0.1 8 8 8 7 2010 11 109 Netherlands 1.1 07 0.4 14 15 15 15 2010 1.2 110 France 0.8 05 0.5 55 57 59 64 2010 1.2 111 Japan 1.2 0.9 0.5 120 123 129 129 2010 1.1 112 Finland 0.2 0.4 03 5 5 5 5 2010 1.1 113 Germany, Fed. Rep. 0.7 -0.1 -0.1 61 61 60 52 2010 1.0 114 Denmark 0.7 02 00 5 5 5 5 2010 11 115 Australia 2.1 1.3 1.1 16 17 18 22 2010 1.4 116 Sweden 0.7 02 00 8 8 8 8 2010 1,1 117 Canada 1.4 1.2 0.9 25 27 29 31 2010 1.3 118 Norway 0.8 0.4 02 4 4 4 4 2010 1,1 119 United States 1.1 1.0 07 237 248 263 288 2010 1.3 120 Switzerland 1.2 0.1 0.1 6 6 7 6 2010 1.1 East European nonmarket economies 0.8 iv 0.8 iv 0.6 iv 389 I 406 1 4301 121 Hungary 0.3 0.2 -0.1 11 11 11 11 2010 1.0 122 Poland 07 0.9 7 37 39 41 49 2000 1.3 123 Albania 2.6 2.0 1.8 3 3 4 6 2005 1.7 124 Bulgaria 0.6 0.3 02 9 9 9 10 2010 1.1 125 Czechoslovakia 03 0.5 0.3 15 16 16 19 2010 1.2 126 German Dem. Rep. 0.0 -0.1 0.0 17 17 17 17 2010 1.1 127 Romania 1.2 0.8 0.6 23 24 25 29 2000 1.3 128 USSR 0.9 09 07 275 289 307 375 2005 13 TotaIb a. For the assumptions used in the projections, see the technical notes. b. Excludes countries with populations of less than 1 million. 229 Table 26. Demography and fertility Crude Crude Percentage Percentage of birth death change in: married women of rate per rate per Crude Crude Total childbearing age thousand thousand birth death fertility using contra- population population rate rate rate ceptiofl 1965 1984 1965 1984 1965-84 1965-84 1984 2000 1970b 1983b Low-income economies 43 iv 29 iv 17 iv 11 iv -31.2w -39.3 iv 3.9w 3.0w China and India 42 w 25 iv 16 iv 9 iv -40.0 iv 44.7 iv 3.2 ii' 2.5 ii' Other low-income 46 ii' 42 a' 21 w 16w' -8.7 iv -25.9 a' 5.9w 4.3w Sub-Saharan Africa 47 iv 47 iv 23 ii' 18 ii' -0.9 iv -19.7 iv 6.6 ii' 5.5 iv 1 Ethiopia 44 41 19 24 -5,7 26.3 6.1 5.5 . . 2 2 Bangladesh 47 41 22 15 -14.0 -28.8 5.7 3.7 25 3 Malt 50 48 27 20 -5.3 -26 7 6.5 5.9 1 4 Zaire 48 45 21 15 -5.8 -28.3 6.1 4.9 3 5 Burkina Faso 46 47 24 21 2.2 -146 65 6.0 1 6 Nepal 46 43 24 18 -5.6 -25.4 6.3 5.3 . 7 7 Burma 40 30 19 11 -24.2 -43.6 4.0 3.0 5 8 Malawi 56 54 27 22 -4.3 -17.0 76 6.4 . . 9 Niger 48 51 29 22 6.1 -26.0 70 64 . . 10 Tanzania 49 50 22 16 2.6 -30.0 7.0 5.7 . . 11 Burundi 47 47 24 19 -0.4 -24.0 6.5 5.9 . . 12 Uganda 49 50 19 16 2.1 -18.6 69 57 . . 1 13 Togo 50 49 23 16 -2.0 -30.5 65 5.4 . 14 Central African Rep 42 34 24 17 -23.8 -32.0 56 5.4 . 15 India 45 33 21 12 -27.1 -41.4 46 2.9 12 35 16 Madagascar 44 47 21 15 6.6 -292 6.5 5.0 . 1 17 Somalia 50 49 26 20 -1.4 -237 6.8 6.2 . . 1 18 Benin 49 49 25 17 06 -29.3 6.5 5.4 . 18 19 Rwanda 52 52 17 19 0.8 8.4 8.0 6.7 . I 20 China 39 19 13 7 -51.3 -50.4 2.3 21 , . 71 21 Kenya 51 53 21 13 4.3 -374 79 56 6 17 22 Sierra Leone 48 49 33 26 10 -203 6.5 6.0 4 23 Haiti 38 32 18 12 -15.2 -31.3 4.5 3.3 .. 7 24 Guinea 46 47 30 26 1.3 -120 6.0 5.6 . . 25 Ghana 49 46 20 14 -3.1 -295 64 4.7 . . 10 26 Sri Lanka 33 26 8 6 -21.1 -25.6 32 2.3 6 55 27 Sudan 47 45 24 17 -3.6 -28.0 66 55 . . 5 28 Pakistan 48 42 21 15 -12.5 -28.9 6.0 4.4 6 11 29 Senegal 47 46 23 19 -2.0 -17.9 6.6 55 . . 4 30 Afghanistan 54 . . 29 . . . .. .. 2 31 Bhutan 43 43 32 21 -0.7 -34.6 6.2 5.2 32 Chad 40 43 26 21 67 -196 5.6 55 33 Kampuchea, Dem. 44 . . 20 . . . . . . 34 Lao PDR 44 42 23 19 -66 -159 6.4 5.4 35 Mozambique 49 45 27 18 -7.8 -32.2 6.3 57 36 VietNam 45 35 17 8 -22.2 -55.3 47 3.0 21 Middle-income economies 42 iv 33 iv 15 iv lOw' -19.5 iv -35.3w' 4.4 a' 3.3 Oil exporters 46 iv 38 iv 18 w' 11 ii' -16.9 ii' -38.8w 5.1 ii' 3.8 ii' Oil importers 38 iv 29 iv 13 a' 9 ii' -22.8 iv -32.5 iv 3.8 iv 2.9 iv Sub-Saharan Africa 50 w 48 ii' 22 a' 16 ii' -2.8 iv -28.7 iv 6.7 iv 5.5 iv Lower middle-income 45 iv 36 iv 18w 11 ii' -19.1 iv -36.7w 4.8w 3.6w 37 Mauritania 44 45 25 19 1.5 -25.1 6.2 5.9 . . 1 38 Liberta 46 49 22 17 6.1 -25.2 6.9 5.7 39 Zambia 49 48 20 15 -2.1 -26.3 68 5.6 . 40 Lesotho 42 41 18 14 -4.5 -19.7 58 4.7 . . 5 41 Bolivia 46 43 21 15 -7.1 -29.4 6.0 4.1 . 24 42 Indonesia 43 33 20 12 -23.7 -392 4.2 28 , , 50 43 Yemen Arab Rep. 49 48 27 21 -3.0 -23.6 6.8 57 . . 44 Yemen, PDR 50 46 27 18 -6.9 -32.3 6.1 44 . 45 Coted'lvoire 44 45 22 14 2.4 -373 6.5 48 . 46 Philippines 42 33 12 8 -21.0 -35.3 4.4 30 2 48 47 Morocco 49 36 19 11 -26.8 -41.1 49 35 1 26 48 Honduras 50 43 17 10 -15.8 -43 5 62 3.8 27 49 ElSalvador 46 39 14 7 -16.6 -50.2 5.3 3.2 . 34 50 PapuaNewGuinea 43 38 20 13 -129 -35.1 54 39 , . 5 51 EgyptArabRep 44 36 19 10 -17.2 -45.6 4.8 3.3 10 30 52 Nigeria 51 50 23 16 -3.4 -28.1 69 5.7 . . 5 53 Zimbabwe 55 47 17 12 -14.2 -31.0 6.3 4.0 . . 27 54 Carneroon 40 47 20 14 18.5 -28.5 6.7 56 .. 3 55 Nicaragua 49 43 16 10 -13.3 -38.4 5.7 38 .. 9 56 Thailand 43 26 12 8 -38.8 -38.7 3.3 2.3 15 63 57 Botswana 53 46 19 12 -13.3 -36.3 6.7 4.7 . 58 Domin:can Rep. 47 33 14 7 -29.6 -48.1 4.0 2.7 .. 32 59 Peru 45 33 17 10 -26.1 -373 4.3 3.0 41 60 Maurittus 37 21 8 7 -43.5 -21.9 2.7 2.3 . . 51 61 Congo, People's Rep. 41 45 18 12 9.3 -31 4 62 56 62 Ecuador 45 36 15 7 -21.4 -50.5 4.8 3.1 .. 40 63 Jamaica 38 28 9 6 -28.5 -33.3 3.3 23 , , 51 64 Guatemala 46 41 16 10 -10.8 -406 58 36 25 65 Turkey 41 30 14 9 -26.6 -41 0 3.9 26 32 38 Note: For data comparability and coverage, see the technical notes. 230 Crude Crude Percentage Percentage of birth death change in: married women of rate per rate per Crude Crude Total childbearing age thousand thousand birth death fertility using contra- population population rate ception rate rate 1965 1984 1965 1984 1965-84 1965-84 1984 2000 1970b 19$3b 66 Costa Rica 45 29 8 4 -35.9 -47.4 3.3 2.3 65 67 Paraguay 41 31 11 7 -25.9 -38.0 4.0 2.6 .. 35 68 Tunisia 44 32 18 9 -27.1 -48.4 4.6 3.0 10 41 69 Colombia 45 28 15 7 -39.0 -50.5 3.4 2.5 34 55 70 Jordan 48 46 18 8 -4.8 -56.0 7.4 5.2 22 26 71 SyrianArabRep. 48 45 16 8 -5.9 -49.2 6.8 4.0 .. 23 72 Angola 49 47 29 22 -3.8 -25.9 6.4 5.9 . 73 Cuba 34 17 8 6 -50.9 -25.0 2.0 2.0 .. 79 74 Korea, Bern. Rep. 39 30 12 6 -23.9 -49.6 3.8 2.6 75 Lebanon 41 . . 13 .. .. , , .. .. 53 76 Mongolia 42 35 12 8 -15.5 -35.0 4.9 3.3 Upper middle-income 37w 30w 12w 8w -20.5w -32.5w 4.0w 2.9w 77 Chile 32 21 11 6 -34.4 -41.7 2.5 2.1 . . 43 78 Brazil 39 30 11 8 -24.6 -30.6 3.6 2.6 . . 50 79 Portugal 23 14 10 10 -37.4 -7.7 2.0 2.0 .. 66 80 Malaysia 41 30 12 6 -26.1 -46.8 3.7 2.4 33 42 81 Panama 40 27 9 5 -33.5 -40.9 3.3 2.1 .. 61 82 Uruguay 21 18 10 9 -15.5 -3.0 2.5 2.1 . 83 Mexico 45 33 11 7 -25.5 -38.8 4.4 2.7 .. 48 84 Korea, Rep. of 36 20 11 6 -43.8 -46.7 2.5 2.1 25 58 85 Yugoslavia 21 16 9 9 -21.9 5.7 2.1 2.1 59 55 86 Argentina 22 24 9 9 8.8 0.0 3.3 2.5 . 87 SouthAfrica 41 38 19 13 -9.2 -31.1 4.9 3.5 88 Algeria 50 42 18 11 -16.6 -42.9 6.4 4.1 . . 7 89 Venezuela 43 32 9 5 -26.8 -43.5 3.9 2.4 .. 49 90 Greece 18 13 8 9 -27.7 12.7 2.1 2.1 91 Israel 26 23 6 7 -12.7 7.9 3.0 2.2 92 Hong Kong 28 14 6 5 -49.1 -17.2 1.8 2.0 42 80 93 Trinidad and Tobago 33 26 7 7 -21.2 -2.8 2.8 2.2 44 52 94 Singapore 31 17 6 6 -43.6 0.0 1.7 1.9 60 71 95 Iran, Islamic Rep. 50 41 17 9 -19.2 -45.3 5.6 4.2 3 23 96 Iraq 49 45 18 10 -8.7 -42.3 6.7 5.1 14 High-income oil exporters 49w 42w 19w 8w -14.2w -56.0w 6.9w 5.1 w 97 Oman 50 45 24 14 -11.0 -43.0 6.8 4.5 98 Libya 49 46 18 11 -7.4 -40.2 7.2 5.4 99 Saudi Arabia 49 43 20 9 -12.4 -58.0 7.1 5.6 100 Kuwait 47 35 8 3 -25.2 -56.9 5.4 2.9 101 UnitedArabEmirates 41 30 15 3 -26.5 -79.1 5.9 3.6 Industrial market economies 19w 14w lOw 9w -28.6w -7.3w 1.8w 2.0w 102 Spain 21 13 8 7 -36.5 -11.9 2.1 2.1 . . 51 103 Ireland 22 19 12 9 -14.0 -19.1 2.7 2.2 104 Italy 19 10 10 9 -46.1 -7.0 1.6 1.9 .. 78 105 NewZealand 23 18 9 8 -21.8 -6.9 2.2 2.1 106 UnitedKingdom 18 13 12 12 -28.8 0.0 1.8 2.0 69 77 107 Belgium 17 12 12 11 -29.1 -9.0 1.6 1.9 .. 85 108 Austria 18 12 13 12 -34.6 -10.8 1.6 1.9 109 Netherlands 20 12 8 8 -39.2 3.8 1.5 1.8 .. 75 110 France 18 14 11 10 -22.5 -12.5 1.9 2.0 64 79 111 Japan 19 13 7 7 -32.6 -2.8 1.8 2.0 56 56 112 Finland 17 13 10 9 -21.6 -5.2 1.7 1.9 77 80 113 Germany, Fed. Rep. 18 10 12 11 -46.3 -1.7 1.4 1.8 114 Denmark 18 10 10 11 -43.9 10.9 1.4 1.8 67 63 115 Australia 20 16 9 7 -20.9 -19.3 2.0 2.0 116 Sweden 16 11 10 11 -28.9 7.9 1.6 1.9 .. 78 117 Canada 21 15 8 7 -29.6 -7.9 1.7 1.9 118 Norway 16 12 10 10 -25.5 7.4 1.7 1.9 .. 71 119 UnitedStates 19 16 9 9 -19.1 -7.4 1.8 2.0 65 76 120 Switzerland 19 12 10 9 -39.8 -4.2 1.5 1.9 .. 70 East European nonmarket economies 18w 19w 8w 11w -5.7w 32.9w 2.3w 2.1 w 121 Hungary 13 12 11 14 -10.7 29.2 1.7 1.9 67 74 122 Poland 17 19 7 10 9.2 29.7 2.3 2.1 60 75 123 Albania 35 26 9 6 -31.6 -27.1 3.4 2.3 124 Bulgaria 15 14 8 11 -10.5 37.8 2.0 2.1 76 125 Czechoslovakia 16 15 10 12 -10.4 18.0 2.0 2.1 .. 95 126 German Bern. Rep. 17 14 14 13 -17.0 -1.5 1.8 2.0 127 Rornania 15 14 9 10 -4.7 20.9 2.2 2.1 58 128 USSR 18 20 7 11 8.9 47.9 2.3 2.1 a. Figures include women whose husbands practice contraception; see the technical notes. b. Figures in italics are for years or periods other than those specified; see the technical notes. 231 Table 27. Life expectancy and related indicators Life expectancy at Infant birth (years) mortality rate Child death rate Male Female (aged under 1( (aged 1-4) 1965 1984 1965 1984 1965 1984 1965 1984 Low-income economies 49 w 60 w 51w 61w 125w 72 w 19w 9w China and India 51w 63 w 53 a' 64 w 115w 59 w 16w 6w Other low-income 44 w 50 w 45 a' 52 w 147w 114 w 27 a' 18w Sub-Saharan Africa 41w 47 w 43w 50w 155w 129w 36 w 26 w 1 Ethiopia 42 43 43 46 166 172 37 39 2 Bangladesh 45 50 44 51 153 124 24 18 3 Mali 37 44 39 48 207 176 47 44 4 Zaire 42 49 45 53 142 103 30 20 5 BurkrnaFaso 40 44 42 46 195 146 52 30 6 Nepal 40 47 39 46 184 135 30 20 7 Burma 46 57 49 60 125 67 21 7 8 Malawi 38 44 40 46 201 158 55 36 9 Niger 35 42 38 45 181 142 46 29 10 Tanzania 41 50 44 53 138 111 29 22 11 Burundi 42 46 45 49 143 120 38 24 12 Uganda 43 49 47 53 122 110 26 21 13 Togo 40 50 43 53 156 98 36 12 14 Central African Rep 40 47 41 50 169 138 47 27 15 India 46 56 44 55 151 90 23 11 16 Madagascar 41 51 44 54 110 22 17 Somalia 36 44 40 47 166 153 37 33 18 Benin 41 47 43 51 168 116 52 19 19 Rwanda 47 46 51 49 141 128 35 26 20 China 55 68 59 70 90 36 11 2 21 Kenya 43 52 46 56 113 92 25 16 22 Sierra Leone 32 38 33 39 221 176 69 44 23 Haiti 46 53 47 57 138 124 37 22 24 Guinea 34 38 36 39 197 176 53 44 25 Ghana 45 51 49 55 123 95 25 11 26 Sri Lanka 63 68 64 72 63 37 6 2 27 Sudan 39 46 41 50 161 113 37 18 28 Pakistan 46 52 44 50 150 116 23 16 29 Senegal 40 45 42 48 172 138 42 27 30 Afghanistan 34 35 223 39 31 Bhu(an 34 44 32 43 184 135 30 20 32 Chad 39 43 41 45 184 139 47 27 33 Kampuchea, Oem, 43 45 135 . . 19 34 Lao POR 39 43 42 46 196 153 34 24 35 Mozambique 36 45 39 48 172 125 31 22 36 VietNam 47 63 50 67 89 50 8 4 Middle-income economies 51w 59 w 54 a' 63 w 115 w 72 w 18 a' 8w Oil exporters 47 w 56 w 50 w 60 a' 138w 89 w 22 or 12w Oil importers 55 w - 62 w 58 w 67 w 97 w 57 or 15w 5w Sub-Saharan Africa 41 w 49 w 44 w 52 w 168 or 107w 33 or 19 w Lower middle-income 47 w 56 w 50w 60w 133 w 83w 22w 11w 37 Mauritania 39 45 42 48 171 133 41 25 38 Liberia 40 48 44 52 172 128 32 23 39 Zambia 42 50 46 53 123 85 29 15 40 Lesotho 47 52 50 56 143 107 20 14 41 Bolivia 42 51 46 54 161 118 37 20 42 Indonesia 43 53 45 56 138 97 20 12 43 Yemen Arab Rep. 37 44 38 46 200 155 55 35 44 Yemen PDR 37 46 39 48 194 146 52 31 45 CotedIvoire 43 51 45 54 176 106 37 15 46 Philippines 54 61 57 65 73 49 11 4 47 Morocco 48 57 51 61 147 91 32 10 48 Honduras 48 59 51 63 131 77 24 7 49 El Salvador 52 63 56 68 120 66 20 5 50 PapuaNewGuinea 44 51 44 54 143 69 23 7 51 EgyptArabRep 47 59 50 62 173 94 21 11 52 Nigeria 40 48 43 51 179 110 33 21 53 Zimbabwe 46 55 49 59 104 77 15 7 54 Cameroon 44 53 47 56 145 92 34 10 55 Nicaragua 49 58 51 62 123 70 24 6 56 Thailand 53 62 58 66 90 44 11 3 57 Botswana 46 55 49 61 108 72 21 11 58 DominicanRep. 52 62 56 66 111 71 14 6 59 Peru 49 58 52 61 131 95 24 11 60 Mauritius 59 62 63 69 64 26 9 1 61 CongoPeoplesRep 48 55 51 59 121 78 19 7 62 Ecuador 54 63 57 67 113 67 22 5 63 Jamaica 63 71 67 76 51 20 4 1 64 Guatemala 48 58 50 62 114 66 16 5 65 Turkey 52 61 55 66 157 86 35 9 Note: For data comparability and coverage, see the technical notes 232 Ut e expectancy at Infant birth (years) mortality rate Child death rate Male Female (aged under 1) (aged 1-4) 1965 1984 1965 1984 1965 1984 1965 1984 66 Costa Rica 63 71 66 76 72 19 - 8 (.) 67 Paraguay 56 64 60 68 74 44 7 2 68 Tunisia 50 60 51 64 147 79 30 8 69 Colombia 53 63 59 67 99 48 8 3 70 Jordan 49 62 51 66 117 50 19 3 71 SyrianArabRep. 51 62 54 65 116 55 19 4 72 Angola 34 42 37 44 193 144 52 30 73 Cuba 65 73 69 77 38 16 4 (.) 74 Korea, Dem. Rep. 55 65 58 72 64 28 6 2 75 Lebanon 60 64 .. 57 4 76 Mongolia 55 61 58 65 89 50 11 4 Upper middle-income 56 w 63 w 60w 68w 91 w 56w 13w 5w 77 Chile 56 67 62 73 110 22 14 1 78 Brazil 55 62 59 67 104 68 14 6 79 Portugal 61 71 68 77 69 19 6 1 80 Malaysia 56 66 59 71 57 28 5 2 81 Panama 62 70 64 73 59 25 4 1 82 Uruguay 65 71 72 75 47 29 3 1 83 Mexico 58 64 61 69 84 51 9 3 84 Korea, Rep. of 55 65 58 72 64 28 6 2 85 Yugoslavia 64 66 68 73 72 28 7 2 86 Argentina 63 67 69 74 59 34 4 1 87 South Africa 45 52 48 56 124 79 22 7 88 Algeria 49 59 51 62 155 82 34 8 89 Venezuela 60 66 64 73 67 38 6 2 90 Greece 69 72 72 78 37 16 2 1 91 Israel 70 73 73 77 29 14 2 (.) 92 Hong Kong 64 73 71 79 28 10 2 (.) 93 Trinidad and Tobago 63 67 67 72 43 22 3 1 94 Singapore 63 70 68 75 28 10 1 95 Iran, lslamicRep. 52 61 52 61 150 112 32 17 96 Iraq 50 58 53 62 121 74 21 7 High-income oil exporters 47w 61w 50w 64 w 141 w 65 w 34w 6 iv 97 Oman 40 52 42 55 175 110 43 17 98 Libya 48 57 51 61 140 91 29 10 99 Saudi Arabia 47 60 49 64 148 61 38 4 100 Kuwait 61 69 64 74 43 22 5 1 101 UnitedArabEmirates 57 70 61 74 104 36 14 1 Industrial market economies 68w 73w 74w 79w 24 iv 9w 1w (.) ii 102 Spain 68 74 73 80 38 10 3 (.) 103 Ireland 69 71 73 76 27 10 1 (.) 104 Italy 68 74 73 79 38 12 3 (.) 105 New Zealand 68 71 74 77 20 12 1 () 106 United Kingdom 68 72 74 78 20 10 1 (.) 107 Belgium 68 72 74 78 24 11 1 (.) 108 Austria 66 70 73 77 30 11 2 (.) 109 Netherlands 71 73 76 80 14 8 1 (.) 110 France 68 74 75 80 22 9 1 (.) 111 Japan 68 75 73 80 21 6 1 () 112 Finland 66 72 73 79 17 6 1 (,) 113 Germany, Fed. Rep. 67 72 73 78 26 10 1 (.) 114 Denmark 71 72 75 78 19 8 1 (.) 115 Australia 68 73 74 79 19 9 1 (.) 116 Sweden 72 74 76 80 13 7 1 (,) 117 Canada 69 72 75 80 24 9 1 () 118 Norway 71 74 76 80 17 8 1 (.) 119 United States 67 72 74 80 25 11 1 (.) 120 Switzerland 69 73 75 80 18 8 1 (.) East European nonmarket economies 66w 66w 73w 71w 31 w 19 iv 2 iv (.) iv 121 Hungary 67 67 72 74 42 19 3 1 122 Poland 66 67 72 76 46 19 3 1 123 Albania 64 67 67 73 87 43 10 3 124 Bulgaria 66 68 72 74 35 17 2 1 125 Czechoslovakia 64 66 73 74 23 15 1 1 126 German Dem. Rep. 67 68 73 75 27 11 1 (.) 127 Romania 66 69 70 74 53 25 1 128 USSR 65 65 74 74 30 .. 2 233 Table 28. Health-related indicators Daily calorie Supply per capita Population per: As percentage Physician Nursing person Total of requirement 1965a 1981 1965 198f 1983 1983 Low-income economies 8,357 w 5,375w 5,037 w 3,920 w 2,336w 102w China and India 4,218w 2,096w 4,443w 2,917w 2,415w 105 w Other low-income 26,631 w 17,234w 7,951 w 7,546 w 2,275 iv 102 w Sub-Saharan Africa 38,649 w 42,670 w 5,714 w 3,022 w 2,084 w 90 ii' 1 Ethiopia 70,190 88,120 5,970 5,000 2,162 93 2 Bangladesh .. 9,010 . 19,400 1,864 81 3 Mali 49,010 25,380 3,200 2,320 1,597 68 4 Zaire 39,050 .. .. . . 2,136 96 5 BurkinaFaso 74,110 49,280 4,170 3,070 2,014 85 6 Nepal 46,180 30,060 .. 33,430 2,047 93 7 Burma 11,660 4,660 11,410 4,890 2,534 117 8 Malawi 46,900 52,960 49,240 2,980 2,200 95 9 Niger 71,440 6,210 . 2,271 97 10 Tanzania 21,840 . . 2,100 . 2,271 98 11 Burundi 54,930 .. 7,310 .. 2,378 102 12 Uganda 11,080 22,180 3,130 2,000 2,351 101 13 Toga 24,980 18,550 4,990 1,640 2,156 94 14 Central African Rep. 44,490 23,090 3,000 2,120 2,048 91 15 India 4,860 2,610 6,500 4,670 2.115 96 16 Madagascar 9,900 9,940 3,620 1,090 2,543 112 17 Somalia 35,060 15,630 3,630 2,550 2,063 89 18 Benin 28,790 16,980 2,540 1,660 1,907 83 19 Rwanda 74,170 29,150 7,450 10,260 2,276 98 20 China 3,780 1,730 3,040 1,670 2,620 111 21 Kenya 13,450 7,540 1,860 990 1,919 83 22 Sierra Leone 17,690 17,670 4,700 2,110 2,082 91 23 Haiti 12,580 .. 12,870 .. 1,887 83 24 Guinea 54,610 .. 4,750 .. 1,939 84 25 Ghana 12.040 6,760 3,710 630 1,516 66 26 Sri Lanka 5,750 7,620 3,210 1,260 2,348 106 27 Sudan 23,500 9,070 3,360 1,440 2,122 90 28 Pakistan 3,160 3,320 9,900 5,870 2,205 95 29 Senegal 21,130 13,060 2,640 1,990 2,436 102 30 Afghanistan 15,770 .. 24,450 31 Bhutan .. 18,160 .. 7,960 32 Chad 73,040 . 13,620 .. 1,620 68 33 Kampuchea, Dem. 22,500 . 3,670 34 Lao PDR 26,510 . 5,320 .. 1.992 90 35 Mozambique 21,560 33,340 5,370 5,610 1,668 71 36 VietNam .. 4,310 .. 1,040 2.017 93 Middle-income economies 11,192 w 4,764 w 3,526 w 1,474 iv 2,611 iv 110 iv Oil exporters 20,085 ii' 6,587 w 5,454w 1,684w 2,512 iv 109 it' Oil importers 3,943 ii' 2,902 w 1,876 w 1 273 w 2,692 iv 111 ii' Sub-Saharan Africa 35,741 w 8,445 w 4,876 iv 2,208w 2,066w 89 iv Lower middle-income 18,215 it' 8,235 it' 4,783 iv 1,783w 2,448w 106 it' 37 Mauritania 36,580 . . .. . 2,252 97 38 Liberia 12,450 8,550 2,300 2,940 2,367 102 39 Zambia 11,390 7,110 5,820 1,660 1,929 84 40 Lesotho 22,930 .. 4,700 .. 2,376 104 41 Bolivia 3,310 1,950 3,990 1,954 82 42 Indonesia 31,820 11,320 9,500 .. 2,380 110 43 Yemen Arab Rep. 58,240 7,070 . . 3,440 2,226 92 44 Yemen, PDR 12,870 7,120 1,850 820 2,254 94 45 Coted'lvoire 20,690 1,850 .. 2,576 112 46 Philippines 1,310 2,150 1,130 2,590 2,357 104 47 Morocco 12,120 17,230 2,290 900 2,544 105 48 Honduras 5,450 .. 1,540 .. 2,135 94 49 El Salvador 4,630 3,220 1,300 .. 2,060 90 50 PapuaNewGuinea 12,520 16,070 620 960 2,109 79 51 Egypt, Arab Rep. 2,260 800 2,030 790 3,163 126 52 Nigeria 44,990 10,540 5,780 2,420 2,022 86 53 Zimbabwe 5,190 6.650 990 1,000 1,956 82 54 Cameroon 29,720 . . 1,970 2,031 88 55 Nicaragua 2,490 2,290 1,390 590 2,268 101 56 Thailand 7,230 6,770 5,020 2,140 2,330 105 57 Botswana 22,090 9.250 16,210 700 2,152 93 58 DominicanRep. 1,720 1390 1,640 1,240 2,368 105 59 Peru 1,620 .. 880 1,997 85 60 Mauritius 3,850 1,730 1,990 570 2,675 118 61 Congo, People's Rep. 14,210 .. 950 . . 2,425 109 62 Ecuador 3,020 .. 2,320 .. 2,043 89 63 Jamaica 1,930 340 .. 2,493 111 64 Guatemala 3,830 . . 8,250 1,360 2,071 95 65 Turkey 2,860 1,500 2,290 1,240 3,100 123 Note: For data comparability and coverage, see the technical notes. 234 Daily calorie supply per capita Population per: As percentage Physician Nursing person Total ot requirement 1965 1981k 1965 ' 1981k 1983 1983 66 Costa Rica 2,040 .. 630 .. 2,556 114 67 Paraguay 1,840 1,310 1,550 650 2,811 122 68 Tunisia 8,040 3,620 1,150 950 2,889 121 69 Colombia 2,530 .. 890 .. 2,546 110 70 Jordan 4,670 1,170 1,810 1170 2,882 117 71 SyriariArab Rep. 4,050 2,160 11,760 1,370 3,156 127 72 Angola 12,000 .. 3,820 .. 2,041 87 73 Cuba 1,150 600 820 .. 2,914 126 74 Korea, Dem. Rep. .. .. .. 2,968 127 75 Lebanon 1,240 .. 2,500 . 76 Mongolia 710 440 310 240 2,841 117 Upper middle-income 2,473w 1,374w 1,914w 975w 2,830w 116w 77 Chile 2,080 950 600 2,574 105 78 Brazil 2,180 1,200 1,550 1,140 2,533 106 79 Portugal 1,170 450 1,160 3,046 124 80 Malaysia 6,220 3,920 1,320 1,390 2,477 111 81 Panama 2,170 1,010 680 2,275 98 82 Uruguay 870 510 590 2,647 99 83 Mexico 2,060 1,140 950 2,934 126 84 Korea, Rep. of 2,740 1,440 2,990 350 2,765 118 85 Yugoslavia 1,190 670 850 300 3,575 141 86 Argentina 640 .. 610 3,159 119 87 SouthAfrica 2,050 .. 500 .. 2,897 118 88 Algeria 8,400 .. 11,770 .. 2,750 115 89 Venezuela 1,270 930 560 .. 2,451 99 90 Greece 710 390 600 370 3,601 144 91 Israel 410 400 300 130 3,110 121 92 Hong Kong 2,400 1,260 1,220 800 2,787 122 93 TrinidadandTobago 3,820 1,390 560 390 3,120 129 94 Singapore 1,910 1,100 600 340 2,636 115 95 Iran, Islamic Rep. 3,770 2,630 4,170 1,160 2,855 118 96 Iraq 4,970 1,790 2,910 2,250 2,840 118 High-income oil exporters 8,836 w 1,408 w 4,626 w 573 w 3,345 w 97 Oman 23,790 1,680 6,380 440 98 Libya 3,970 660 850 360 3,651 155 99 Saudi Arabia 9,400 1,800 6,060 730 3,244 134 100 Kuwait 830 600 270 180 3,369 101 United Arab Emirates .. 720 .. 390 3,407 Industrial market economies 867w 554w 425w 177w 3,352w 130w 102 Spain 810 360 1,220 280 3,237 132 103 Ireland 960 780 170 120 3,579 143 104 Italy 1,850 750 790 250 3,521 140 105 NewZealand 820 590 980 110 3,493 132 106 United Kingdom 860 680 200 120 3,226 128 107 Belgium 700 380 590 130 3,705 140 108 Austria 720 580 350 170 3,479 132 109 Netherlands 860 480 270 .. 3,477 129 110 France 890 460 .. 110 3,514 139 111 Japan 970 740 410 210 2,653 113 112 Finland 1,290 460 180 100 3,077 114 113 Germany, Fed. Rep. 680 420 500 170 3,475 130 114 Denmark 740 420 190 140 3,525 131 115 Australia 720 500 110 100 3,068 115 116 Sweden 910 410 310 100 3,115 116 117 Canada 770 510 190 120 3,459 13 118 Norway 800 460 340 70 3,088 115 119 UnitedStates 640 500 310 180 3,623 137 120 Switzerland 750 390 270 130 3,472 129 East European nonmarket economies 564w 329w 300w 199w 3,409w 132w 121 Hungary 630 320 240 140 3,563 135 122 Poland 800 550 410 . . 3,336 127 123 Albania 2,100 .. 550 .. 2,907 121 124 Bulgaria 600 400 410 190 3,675 147 125 Czechoslovakia 540 350 200 130 3,555 144 126 German Oem. Rep. 870 490 .. .. 3,718 142 127 Romania 740 650 400 280 3,341 126 128 USSR 480 260 280 .. 3,381 132 a, Figures in italics are for years other than those specified; see the technical notes. 235 Table 29. Education Number Number enrolled in enrolled in secondary higher education Number enrolled in primary school as percentage school as as percentage of age group percentage of of population Total Male Female age group aged 20-24 1965 1983 1965 1983a 1965 1983a 1965a 1983 1965a 1983 Low-income economies 80 91w 76w 101 iv 46 w 76 iv 23w 31 iv 2 iv 4 iv China and India 83 w 96 iv 109w 83w .. 35w 2 iv 4 iv Other low-income 44 w 74 w 57 w 76 w 31 iv 56 iv 9 iv 20 iv 1 iv 2 ii' Sub-Saharan Africa 37 w 76 w 48 w 69 w 27w 51w 4w 13w (.) w 1 ii' 1 Ethiopia 11 46 16 58 6 34 2 13 (.) 1 2 Bangladesh 49 62 67 67 31 55 13 19 1 4 3 Mali 24 24 32 30 16 18 4 7 (.) 1 4 Zaire 70 .. 95 45 5 (.) 1 5 Burkina Faso 12 27 16 34 8 20 1 4 (.) 1 6 Nepal 20 73 36 100 4 43 5 22 1 5 7 Burma 71 91 76 .. 65 .. 15 23 1 5 8 Malawi 44 63 55 73 32 52 2 5 (.) (.) 9 Niger 11 27 15 34 7 19 1 6 .. 1 10 Tanzania 32 87 40 91 25 84 2 3 (.) (.) 11 Burundi 26 45 36 55 15 36 1 4 (.) 1 12 Uganda 67 57 83 65 50 49 4 8 (.) 1 13 Togo 55 102 78 124 32 80 5 24 (.) 2 14 Central African Rep. 56 77 84 98 28 51 2 16 .. 1 15 India 74 85 89 100 57 68 27 34 5 9 16 Madagascar 65 .. 70 . . 59 .. 8 .. 1 1 17 Somalia 10 21 16 28 4 15 2 14 (.) 1 18 Benin 34 67 48 92 21 43 3 22 (.) 2 19 Rwanda 53 62 64 64 43 60 2 2 (.) (.) 20 China 89 104 . 116 . 93 24 35 (.) 1 21 Kenya 54 100 69 104 40 97 4 19 (.) 1 22 Sierra Leone 29 45 37 . 21 . . 5 14 (.) 1 23 Haiti 50 69 56 74 44 64 5 13 (.) 1 24 Guinea 31 36 44 49 19 23 5 15 (.) 3 25 Ghana 69 79 82 89 57 70 13 38 1 2 26 Sri Lanka 93 101 98 103 86 99 35 56 2 4 27 Sudan 29 50 37 59 21 42 4 18 1 2 28 Pakistan 40 49 59 63 20 33 12 16 2 2 29 Senegal 40 53 52 63 29 42 7 12 1 2 30 Afghanistan 16 . . 26 .. 5 2 . (.) 31 Bhutan 7 25 13 32 1 17 1 4 . (.) 32 Chad 34 38 56 55 13 21 1 6 . . (.) 33 Kampuchea, Oem. 77 .. 98 .. 56 . . 9 .. 1 34 Lao POR 40 87 50 94 30 80 2 16 (.) 1 35 Mozambique 37 79 48 91 26 68 3 6 (.) (.) 36 VietNam .. 113 . . 120 105 . . 48 .. 2 Middle-income economies 84w 105w 90w 108w 77w lOOiv 20 iv 47 iv 4 iv 12 iv Oil exporters 70 ii' 107 iv 79w 115w 60 iv 104 iv 15 iv 45 iv 2 iv 8 iv Oil importers 96 iv 103w 100 iv 106 iv 92iv 100 iv 24 iv 49 iv 6 iv 15 iv Sub-Saharan Africa 45 iv 98 iv 54 iv 106 iv 35 iv 90 iv 5 iv 22 iv (.)w 2 iv Lower middle-income 72 iv 101 ii' 83 iv 111 iv 66iv 100 iv 16w 40 iv 4 iv 12 ii' 37 Mauritania 13 37 19 45 6 29 1 12 . 38 Liberia 41 76 59 95 23 57 5 23 1 2 39 Zambia 53 94 59 100 46 89 7 17 .. 2 40 Lesotho 94 110 74 94 114 126 4 19 (.) 2 41 Bolivia 73 87 86 94 60 81 18 35 5 16 42 Indonesia 72 115 79 118 65 112 12 37 1 4 43 Yemen Arab Rep. 9 65 16 107 1 21 1 9 .. 44 Yemen, PDR 23 67 35 97 10 36 11 19 45 Cote d'Ivoire 60 79 80 93 41 64 6 19 (.) 3 46 Philippines 113 114 115 115 111 113 41 63 19 26 47 Morocco 57 79 78 97 35 61 11 29 1 6 48 Honduras 80 101 81 101 79 100 10 33 1 10 49 El Salvador 82 69 85 69 79 69 17 24 2 12 50 PapuaNewGuinea 44 61 53 68 35 55 4 11 .. 2 51 Egypt, Arab Rep. 75 88 90 101 60 76 26 58 7 16 52 Nigeria 32 98 39 .. 24 . . 5 .. (.) 2 53 Zimbabwe 110 131 128 136 92 127 6 39 (.) 3 54 Cameroon 94 108 114 117 75 98 5 21 (.) 2 55 Nicaragua 69 100 68 97 69 103 14 43 2 13 56 Thailand 78 99 82 101 74 97 14 29 2 22 57 Botswana 65 96 59 89 71 102 3 21 .. 2 58 DomiriicanRep. 87 109 87 104 87 115 12 45 2 10 59 Peru 99 116 108 120 90 112 25 61 8 22 60 Mauritius 101 112 105 112 97 112 26 51 3 1 61 Congo, People's Rep. 114 .. 134 . . 94 .. 10 . . 1 6 62 Ecuador 91 115 94 117 88 114 17 53 3 35 63 Jamaica 109 107 112 106 106 107 51 58 3 6 64 Guatemala 50 73 55 78 45 67 8 16 2 7 65 Turkey 101 112 118 116 83 107 16 38 4 7 Note: For data comparability and coverage, see the technical notes. 236 Number Number enrolled in enrolled in secondary higher education Number enrolled in primary school school as as percentage as percentage of age group percentage ot of population Total Male Female age group aged 20-24 1965a 1983a 1965 1983 1965 1983 1965 1983e 1965 1983 66 Costa Rica 106 102 107 103 105 100 24 44 6 26 67 Paraguay 102 103 109 107 96 99 13 36 4 68 Tunisia 91 113 116 125 65 102 16 33 2 5 69 Colombia 84 120 83 119 86 122 17 49 3 13 70 Jordan 95 100 105 101 83 98 38 78 2 33 71 SyrianArabRep. 78 105 103 114 52 96 28 56 8 16 72 Angola 39 .. 53 26 5 12 () 2 73 Cuba 121 108 123 111 119 105 23 74 3 20 74 Korea, Dem, Rep. . . .. .. .. . . . . . . . 75 Lebanon 106 118 .. 93 .. 26 14 76 Mongolia 98 106 98 105 97 107 66 86 8 25 Upper middle-income 96w 99 w 100w 109 u' 92w 102 w 25w 55 w 5w 14 w 77 Chile 124 111 125 112 122 110 34 65 6 11 78 Brazil 108 102 109 106 108 99 16 42 2 11 79 Portugal 84 122 84 122 83 123 42 43 5 11 80 Malaysia 90 99 96 100 84 98 28 49 2 4 81 Panama 102 104 104 106 99 101 34 59 7 22 82 Uruguay 106 109 106 110 106 107 44 67 8 21 83 Mexico 92 119 94 120 90 117 17 55 4 15 84 Korea, Rep. of 101 103 103 104 99 102 35 89 6 24 85 Yugoslavia 106 101 108 101 103 101 65 82 13 20 86 Argentina 101 107 101 107 102 107 28 60 14 25 87 South Africa 90 . . 91 88 . . 15 . 4 88 Algeria 68 94 81 106 53 82 7 43 1 5 89 Venezuela 94 105 93 106 94 104 27 43 7 22 90 Greece 110 105 111 105 109 105 49 82 10 17 91 Israel 95 96 95 95 95 97 48 78 20 34 92 Hong Kong 103 106 106 107 99 104 29 68 5 12 93 Trinidad and Tobago 93 107 97 107 90 108 36 70 2 5 94 Singapore 105 113 110 115 100 111 45 69 10 12 95 Iran, Islamic Rep. 63 101 85 113 40 88 18 40 2 4 96 Iraq 74 106 102 113 45 99 28 53 4 10 High-income oil exporters 43w 75zv 59w 85w 25 iv 65 iv 10 iv 42 iv 1 iv 10 iv 97 Oman . . 83 94 .. 72 . 28 98 Libya 78 . . 111 44 14 1 11 99 Saudi Arabia 24 69 36 81 11 56 4 36 1 9 100 Kuwait 116 95 129 96 103 94 52 83 . . 14 101 United Arab Emirates .. 95 94 .. 95 22 54 (.) 6 Industrial market economies 106w 102 iv 107w 102w 106w 101 iv 63 iv 85 ii' 21 iv 37w 102 Spain 115 111 117 112 114 110 38 90 6 24 103 Ireland 108 97 107 97 108 97 51 93 12 22 104 Italy 112 103 113 103 110 102 47 75 11 26 105 NewZealand 106 102 107 103 104 101 75 87 15 28 106 United Kingdom 92 101 92 100 92 101 66 85 12 20 107 Belgium 109 97 110 96 108 97 75 108 15 28 108 Austria 106 99 106 100 105 98 52 74 9 25 109 Netherlands 104 96 104 95 104 97 61 101 17 31 110 France 134 108 135 109 133 107 56 89 18 28 111 Japan 100 100 100 100 100 100 82 94 13 30 112 Finland 92 102 95 102 89 101 76 103 11 31 113 Germany, Fed. Rep. .. 100 .. 100 .. 100 . . 50 9 30 114 Denmark 98 101 97 100 99 101 83 105 14 29 115 Australia 99 105 99 105 99 104 62 92 16 26 116 Sweden 95 98 94 98 96 99 62 85 13 39 117 Canada 105 103 106 105 104 102 56 101 26 42 118 Norway 97 98 97 98 98 99 64 96 11 28 119 United States . . 100 . . 100 100 . . . . 40 56 120 Switzerland 87 87 87 . 37 .. 8 23 East European nonmarket economies 103w 104w lQ3w 98w 103w 98w 65w 91w 26w 20w 121 Hungary 101 101 102 101 100 101 63 74 13 15 122 Poland 104 101 106 101 102 100 58 75 18 16 123 Albania 92 101 97 104 87 97 33 67 8 7 124 Bulgaria 103 100 104 100 102 100 54 85 17 16 125 Czechoslovakia 99 88 100 88 97 89 29 45 14 16 126 GermanDem.Rep. 109 95 107 94 111 96 60 88 19 30 127 Romania 101 99 102 100 100 99 39 63 10 12 128 USSR 103 106 103 .. 103 . . 72 99 30 21 a. Figures in italics are for years other than those specified: see the technical notes. 237 Table 30. Labor force Percentage of population of Average annual growth working age Percentage of labor force in of labor force (15-64 years) Agriculture Industry Services (percent) 1965 1984 1965 1980 1965 1980 1965 1980 1965-73 1973-84 1980-2000 Low-income economies 53 w 59 w 78w 70w 9w 15w 13w 15w 2.3 iv 2.2 w 2.0 iv China and India 55 w 61 iv 70w 17w 14w 2.3 iv 1.8w 2.0 iv Other low-income 47 iv 53 iv 78iv 71w 8w lOw 14w 19w 2.0 iv 3.8 w 2.6 ii' Sub-Saharan Africa 53 w 50 w 86w 79w 5w 8w 9w 13w 2.2w 2.2 iv 2.8 iv 1 Ethiopia 52 51 86 80 5 8 8 12 22 2.2 2.5 2 Bangladesh 51 53 84 75 5 6 11 19 2.3 2.6 2.4 3 Mali 53 50 90 86 1 2 8 13 2.2 1.9 2.4 4 Zaire 52 51 82 72 9 13 9 16 1.9 2.3 2.8 5 BurkinaFaso 53 52 89 87 3 4 7 9 1.6 1.4 1.7 6 Nepal 56 54 94 93 2 1 4 6 1.6 2.3 2.6 7 Burma 57 55 64 53 13 19 23 28 1.3 1.3 2.0 8 MalawL 51 48 92 83 3 7 5 9 2.3 2.5 2.7 9 Niger 51 51 95 91 1 2 4 7 2.1 28 30 10 Tanzania 53 50 92 86 3 5 6 10 26 2.6 32 11 Burundi 53 52 94 93 2 2 4 5 1.2 1.7 2.5 12 Uganda 53 49 91 86 3 4 6 10 3,1 2.2 3.2 13 Togo 52 50 78 73 8 10 13 17 3.2 2.0 2.9 14 Central African Rep. 57 55 89 72 3 6 8 21 1.1 1.6 2.4 15 India 54 56 73 70 12 13 15 17 1.8 2.1 2.1 16 Madagascar 54 50 .. 88 .. 3 .. 9 1.9 2.0 29 17 Somalia 49 52 81 76 6 8 13 16 3.8 2.6 2.6 18 Benin 52 50 83 70 5 7 12 23 2.1 2.0 2.6 19 Rwanda 51 51 94 93 2 3 3 4 2.7 2.8 3.1 20 China 55 64 .. 69 .. 19 .. 12 2.6 1.6 2.0 21 Kenya 48 45 86 81 5 7 9 12 3.3 2.8 3.5 22 Sierra Leone 54 54 79 70 11 14 11 16 10 1.8 1.9 23 Haifi 54 55 77 70 7 8 16 22 0.7 1.6 2.0 24 Guinea 55 53 87 81 6 9 6 10 1.2 1.2 1.8 25 Ghana 52 48 61 56 15 18 24 26 1.4 1.5 3.5 26 Sri Lanka 54 60 56 53 14 14 30 33 2.0 2.1 2.2 27 Sudan 53 52 82 71 5 7 13 22 2.8 2.4 2.8 28 Pakistan 50 53 60 55 18 16 22 30 2.3 3.3 29 29 Senegal 53 52 83 81 5 6 11 13 1.7 2.2 2.4 30 Afghanistan 55 69 11 20 1.9 31 Bhu(an 55 56 95 92 2 3 3 5 1.0 1.9 2.2 32 Chad 55 56 92 83 3 5 5 12 1.6 2.3 2.3 33 Kampuchea, Oem. 52 .. 80 . 4 .. 16 .. 1.3 34 Lao POR 56 52 81 76 5 7 14 17 06 0.5 2.6 35 Mozambique 55 51 87 85 5 7 7 8 1.8 1.6 2.4 36 VietNam .. 55 79 68 6 12 15 21 , .. 2.7 Middle-income economies 53 w 56 w 57 w 44 w 17w 22 w 26w 34w 2.2 w 2.6 iv 2.3 iv Oil exporters 52 w 53 w 61w 49 w 14 iv 19w 24w 32w 2.2 w 2.6 iv 2.7 iv Oil importers 54 iv 58 w 53 w 40 w 19w 23 w 28w 36w 2.1 iv 2.6 iv 2.0 iv Sub-Saharan Africa 52 w 50 w 75 w 69 w 9w 11w 16w 20w 2.0 iv 2.3 iv 2.8 iv Lower middle-income 52w 55w 66w 56w 12w 16w 22w 29w 2.1w 2.5w 2.4iv 37 Mauritania 52 53 90 69 3 9 7 22 1.9 2.3 2.1 38 Liberia 51 52 79 74 10 9 11 16 2.1 3.6 2.5 39 Zambia 51 49 79 73 8 10 13 17 2.3 21 3.1 40 Lesotho 56 53 92 86 3 4 6 10 1.7 1.8 2.3 41 Bolivia 53 53 54 46 20 20 26 34 1.8 2.5 2.9 42 Indonesia 53 56 71 57 9 13 20 30 1.9 2.3 2.1 43 Yemen Arab Rep. 54 51 79 69 7 9 14 22 1.0 2.1 3.2 44 Yemen, PDR 52 51 54 41 12 18 33 41 1.1 1.8 26 45 Coted'lvoire 54 53 81 65 5 8 14 27 4.2 3.9 3.3 46 Philippines 52 56 58 52 16 16 26 33 21 3.1 2.6 47 Morocco 50 52 62 46 15 25 24 29 1.8 2.6 3.1 48 Honduras 50 50 68 61 12 16 20 23 2.4 3.3 3.4 49 El Salvador 50 51 59 56 16 14 25 30 3.2 2.9 3.4 50 Papua New Guinea 55 54 87 76 6 10 7 14 1.9 2.0 2.1 51 Egypt, Arab Rep 54 57 55 46 14 20 30 34 2.1 2.5 2.5 52 Nigeria 51 49 72 68 10 12 18 20 1.7 2.0 3.1 53 Zimbabwe 51 45 79 53 8 13 13 34 2.7 1.5 3.4 54 Cameroon 55 50 87 70 4 8 9 22 1.9 1.8 3.0 55 Nicaragua 48 50 57 47 16 16 27 38 3.0 3.2 3.7 56 Thailand 50 59 82 70 5 10 13 20 24 30 1.9 57 Botswana 50 48 89 70 4 13 7 17 2.2 4.2 2.9 58 Dominican Rep. 48 55 59 46 13 16 27 39 2.7 3.3 3.0 59 Peru 51 56 50 40 19 18 31 42 24 29 29 60 Mauritius 52 62 37 28 25 24 38 48 28 2.3 2.1 61 Congo, People's Rep. 55 51 66 62 11 12 23 26 1.9 1.9 3.7 62 Ecuador 50 53 55 39 19 20 26 42 31 29 3.0 63 Jamaica 51 56 37 33 20 18 43 49 07 23 2.5 64 Guatemala 50 53 64 57 15 17 21 26 2.7 2.8 29 65 Turkey 53 58 75 58 11 17 14 25 1.8 2.0 2.2 Note: For data comparability and coverage, see the technical notes. 238 Percentage of population of Average annual growth working age Percentage of labor force in: of labor force (15-64 years) Agriculture Industry Services (percent) 1965 1984 1965 1980 1965 1980 1965 1980 1965-73 1973-84 1980-2000 66 Costa Rica 49 59 47 31 19 23 34 46 3.7 3.8 2.8 67 Paraguay 50 55 55 49 20 21 26 31 2.5 3.3 3.0 68 Tunisia 50 56 49 35 21 36 29 29 1.3 2.9 2.9 69 Colombia 49 59 45 34 21 24 34 42 3.1 2.8 2.5 70 Jordan 51 48 36 10 26 26 37 64 2.6 1.6 4.7 71 SyrianArabRep. 46 49 52 32 20 32 28 36 3.1 3.4 3.9 72 Angola 54 52 79 74 8 10 13 17 1.5 2.6 2.7 73 Cuba 59 65 33 24 25 29 41 48 1.0 2.2 1.7 74 Korea, Dem. Rep. 52 57 57 43 23 30 20 27 2.6 3.0 2.7 75 Lebanon 51 . 28 , 25 .. 47 .. 25 76 Mongolia 54 55 55 40 20 21 25 39 2.2 2.6 3.0 Upper middle-income 54w 58w 45w 29w 23w 29w 32 w 42w 2.3w 2.6w 2.2w 77 Chile 56 63 27 16 29 25 44 58 1.3 2.5 2,1 78 Brazil 53 58 48 31 20 27 31 42 25 3.0 2.3 79 Portugal 62 64 38 26 31 37 32 38 0.1 0.9 0.7 80 Malaysia 50 58 59 42 13 19 28 39 2.9 3.2 2.9 81 Panama 51 57 46 32 16 18 38 50 3.3 2.6 2.2 82 Uruguay 63 63 20 16 29 29 51 55 0.3 05 0.9 83 Mexico 49 53 50 37 22 29 29 34 3.1 3.2 3.2 84 Korea, Rep. of 53 64 56 36 14 27 30 37 2.9 2.7 1.9 85 Yugoslavia 63 67 57 32 26 33 17 34 0.7 0.5 0.6 86 Argentina 63 61 18 13 34 34 48 53 1.4 1.1 1.5 87 South Africa 54 56 32 17 30 35 38 49 27 3.0 2.3 88 Algeria 50 49 57 31 16 27 26 42 16 3.6 4.1 89 Venezuela 49 55 30 16 24 28 47 56 3.5 3.9 3.4 90 Greece 65 64 47 31 24 29 29 40 01 0.9 0.5 91 Israel 59 59 12 6 35 32 53 62 3.2 2.3 2.2 92 Hong Kong 56 68 6 2 53 51 41 47 3.5 3.7 1,1 93 Trinidadandlobago 53 61 20 10 35 39 45 51 2.0 2.3 2.2 94 Singapore 53 67 5 2 27 38 68 61 3.4 2.2 1.1 95 Iran, Islamic Rep. 50 52 49 36 26 33 25 31 3.1 3.0 3.6 96 Iraq 51 50 50 31 20 22 30 48 2.9 31 3.8 High-income oil exporters 52w 55w 56w 36 w 15 w 21 w 28 a' 44w 4.0 w 5.6 w 3.4w 97 Oman 53 53 62 50 15 22 23 28 00 00 0.0 98 Libya 53 52 40 18 21 30 39 53 3.6 4.1 4.1 99 SaudiArabia 53 54 68 49 11 14 21 37 3.9 5.9 3.2 100 Kuwait 60 57 2 2 34 32 64 67 53 6.9 3.1 101 UnitedArabEmirates . . 67 20 5 32 38 47 57 Industrial market economies 63w 67w 14w 7w 38w 35w 48 w 58 w 1.2w 1.2 w 0.7 w 102 Spain 64 64 34 17 35 37 32 46 0.4 13 0.8 103 Ireland 57 59 31 19 28 34 41 48 05 1.4 15 104 Italy 66 67 24 12 42 41 34 48 0.0 0.7 0.3 105 NewZealand 59 65 13 11 36 33 51 56 2.0 1.3 1.1 106 United Kingdom 65 65 3 3 47 38 50 59 0.2 0.5 0.2 107 Belgium 63 67 6 3 46 36 48 61 0.5 0.7 0.2 108 Austria 63 66 19 9 45 41 36 50 -0.2 1.0 0.3 109 Netherlands 62 68 9 6 41 32 50 63 1.4 1.4 0.5 110 France 62 66 17 9 39 35 43 56 0.7 11 0.7 111 Japan 67 68 26 11 32 34 42 55 1.7 1.1 0.7 112 Finland 65 67 23 12 36 35 41 53 0.5 0.5 0.5 113 Germany, Fed. Rep. 65 69 10 6 48 44 42 50 0.3 0.8 -0.1 114 Denmark 65 66 14 7 37 32 49 61 0.8 0.6 0.3 115 Australia 62 66 10 7 38 32 52 61 2.5 1.7 1.3 116 Sweden 66 65 11 6 43 33 46 62 0.7 0.4 0.3 117 Canada 59 68 10 5 33 29 57 65 2.7 2.0 1.1 118 Norway 63 64 15 8 37 29 48 62 06 07 0.6 119 UnitedStates 60 66 5 4 35 31 60 66 1.9 1.6 0.9 120 Switzerland 65 67 9 6 50 39 41 55 1.5 0.4 0.2 East European nonmarket economies 62 w 65w 35w 21w. 34w 40w 31w 39w 0.8w 1.0w 0.5w 121 Hungary 66 65 31 18 40 44 29 38 0.5 0.0 0.0 122 Poland 62 65 43 29 32 39 25 33 1.7 1.2 0.8 123 Albania 52 59 69 56 19 26 12 18 2.4 2.4 2.3 124 Bulgaria 67 66 46 18 31 45 23 37 0.6 0.1 0.1 125 Czechoslovakia 65 64 21 13 48 49 31 37 08 0.5 0.6 126 German Oem. Rep. 61 66 15 11 49 50 36 39 0.4 0.7 0.1 127 Roman/a 65 65 57 29 26 44 18 27 0.8 0.5 0.6 128 USSR 62 66 33 20 33 39 33 41 0.7 1.1 0.5 a. Figures in italics are for years other than those specified. 239 Table 31. Urbanization Urban population Percentage of urban population Number of As percentage Average annual In cities of cities of of total growth rate In largest over 500,000 over 500,000 population (percent) city persons persons l965 1984e 1965-73 1973-84 1960 1980 1960 1980 1960 1980 [ow-income economies 17w 23 u' 4.5 u, 4.6 U' 10w 16w 31 u' 55w 551 147 China and India 18 w 23 w . . . 7w 6w 33 w 59 U' 49 1 114 1 Other low-income 13w 22w 5.2w 5.1 w 26w 29w 19w 41 w 61 331 Sub-Saharan Africa 11 w 21 U' 6.2 w 6.1 w 34w 42 w 2w 36 w 11 14 I 1 Ethiopia 8 15 7.4 6.1 30 37 0 37 0 1 2 Bangladesh 6 18 6.6 7.7 20 30 20 51 1 3 3 Mali 13 19 5.4 4.5 32 24 0 0 0 0 4 Zaire 19 39 5.9 7.1 14 28 14 38 1 2 5 Burkina Faso 6 11 6.5 4.8 . 41 0 0 0 0 6 Nepal 4 7 4,3 8.4 41 27 0 0 0 ü 7 Burma 21 29 4.0 4.0 23 23 23 23 1 2 8 Malawi 5 12 82 73 .. 19 0 0 0 0 9 Niger 7 14 7.0 71 .. 31 0 0 0 0 10 Tanzania 6 14 8 86 34 50 0 50 0 1 11 Burundi 2 2 14 3,3 , , . . 0 0 0 0 12 Uganda 6 7 83 -0.1 38 52 0 52 0 1 13 Togo 11 23 64 6.5 60 0 0 0 0 14 Central African Rep 27 45 44 4.6 40 36 0 0 0 0 15 India 19 25 4.0 4.2 7 6 26 39 11 36 16 Madagascar 12 21 5.3 5.5 44 36 0 36 0 1 17 Somalia 20 33 6.4 5.4 . . 34 0 0 0 0 18 Benin 11 15 4.5 50 . . 63 0 63 0 1 19 Rwanda 3 5 6.0 66 0 0 0 0 0 20 China 18 22 3.0 29 6 6 42 45 38 78 21 Kenya 9 18 7.3 7.9 40 57 0 57 0 1 22 Sierra Leone 15 24 5.0 3.5 37 47 0 0 0 0 23 Haiti 18 27 38 42 42 56 0 56 0 1 24 Guinea 12 27 5.0 62 37 80 0 80 0 1 25 Ghana 26 39 45 53 25 35 0 48 0 2 26 Sri Lanka 20 21 34 3.5 28 16 0 16 0 1 27 Sudan 13 21 63 55 30 31 0 31 0 1 28 Pakistan 24 29 43 4,4 20 21 33 51 2 7 29 Senegal 27 35 42 3.8 53 65 0 65 0 1 30 Afghanistan 9 . . 56 33 0 0 1 31 Bhutan 3 4 -2.1 4.6 0 0 0 0 0 0 32 Chad 9 21 69 6.5 39 0 0 0 0 33 Kampuchea, Gem. 11 . . 3.4 . . . . . . 34 Lao PDR 8 15 4.6 57 69 48 0 0 0 0 35 Mozambique 5 16 82 102 75 83 0 83 0 1 36 VietNam 16 20 55 23 32 21 32 50 1 4 Middle-income 36 U' 49 i 4.5 w 4.1 to 28 w 29 U' 35 U' 48w 54 1 126 1 Oil exporters 29 U' 42 w 4.4 u' 4.4 w 27 u' 30w 32 ii' 48 U' 15 I 421 Olt importers 40 w 55 w 4.5 U' 3.6 u' 28 U' 28 w 36 w 48 ii' 39 I 85 I Sub-Saharan Africa 16 w 28 ti 6.4 w 5.9 U' 18 u' 24 w 15 U' 50 ii' 2! 141 Lower middle-income 26 ii' 37 u' 5.1 ii' 4.2 ii' 27 ii' 31 ii' 28 ii' 46 ii' 23 I 59 I 37 Mauritania 7 26 16.0 5.1 . . 39 0 0 0 0 38 Liberia 22 39 5.3 6.0 . . . . 0 0 0 0 39 Zambia 24 48 76 6.4 .. 35 0 35 0 1 40 Lesotho 2 13 78 20.1 . . 0 0 0 0 41 Bolivia 40 43 8.9 36 47 44 0 44 0 1 42 Indonesia 16 25 4,1 4.5 20 23 34 50 3 9 43 YemenArabRep. 5 19 9.7 8.8 .. 25 0 0 0 0 44 Yemen, PDR 30 37 3.4 35 61 49 0 0 0 0 45 Cole d'lvoire 23 46 82 8.3 27 34 0 34 0 1 46 Philippines 32 39 4.0 3.7 27 30 27 34 1 2 47 Morocco 32 43 4.0 4.2 16 26 16 50 1 4 48 Honduras 26 39 5.4 5,7 31 33 0 0 0 0 49 El Salvador 39 43 3.6 3.6 26 22 0 0 0 0 50 PapuaNewGuinea 5 14 14.3 6.1 .. 25 0 0 0 0 51 Egypt, Arab Rep. 40 23 30 3.0 38 39 53 53 2 2 52 Nigeria 15 30 4.7 5.2 13 17 22 58 2 9 53 Zimbabwe 14 27 6.8 61 40 50 0 50 0 1 54 Cameroon 16 41 73 8.2 26 21 0 21 0 1 55 Nicaragua 43 56 4.4 52 41 47 0 47 0 1 56 Thailand 13 18 4.8 3.1 65 69 65 69 1 1 57 Botswana 4 20 19.0 11.3 .. , , .. 58 Dominican Rep 35 55 5.6 4.7 50 54 0 54 0 1 59 Peru 52 68 4.7 36 38 39 38 44 1 2 60 Mauritius 37 56 4.6 3.4 . . . . .. . . 61 Congo, People's Rep. 35 56 4.4 5.4 77 56 0 0 0 0 62 Ecuador 37 47 3.9 3.9 31 29 0 51 0 2 63 Jamaica 38 53 43 2.7 77 66 0 66 0 1 64 Guatemala 34 41 3.8 4.1 41 36 41 36 1 1 65 Turkey 32 46 4.9 4.0 18 24 32 42 3 4 Note: For data comparability and coverage, see the technical notes. 240 Urban population Percentage of urban population Number of As percentage Average annual In cities of cities of of total growth rate In largest over 500,000 over 500,000 population (percent) city persons persons 1965° 1984° 1965-73 1973-84 1960 1980 1960 1980 1960 1980 66 Costa Rica 38 45 3.8 33 67 64 0 64 0 1 67 Paraguay 36 41 3.2 34 44 44 0 44 0 1 68 Tunisia 40 54 41 3.8 40 30 40 30 1 1 69 Colombia 54 67 4.3 29 17 26 28 51 3 4 70 Jordan 47 72 4.7 4.7 31 37 0 37 0 1 71 Syrian Arab Rep. 40 49 48 4.3 35 33 35 55 1 2 72 Angola 13 24 59 6.0 44 64 0 64 0 1 73 Cuba 58 71 28 1.6 32 38 32 38 1 1 74 Korea, Dem. Rep. 45 63 49 4.1 15 12 15 19 1 2 75 Lebanon 49 . 6.2 . 64 .. 64 1 1 76 Mongolia 42 55 4.6 4.1 53 52 0 0 0 0 Upper middle-income 49 w 65 w 3.9 w 4.1 w 28 iv 29 w 40 iv 51 iv 31 I 67 1 77 Chile 72 83 2.8 2.4 38 44 38 44 1 1 78 Brazil 51 72 45 4.0 14 15 35 52 6 14 79 Portugal 24 31 12 2.5 47 44 47 44 1 1 80 Malaysia 26 31 33 36 1.9 27 0 27 0 1 81 Panama 44 50 4.1 3.1 61 66 0 66 0 1 82 Uruguay 81 85 08 08 56 52 56 52 1 1 83 Mexico 55 69 4,8 4.0 28 32 36 48 3 7 84 Korea. Rep. of 32 64 6.5 4.6 35 41 61 77 3 7 85 Yugoslavia 31 46 3.1 2.7 11 10 11 23 1 3 86 Argentina 76 84 2.1 2.1 46 45 54 60 3 5 87 South Africa 47 56 2.6 37 16 13 44 53 4 7 88 Algeria 32 47 2.5 5.4 27 12 27 12 1 1 89 Venezuela 72 85 4.8 4.3 26 26 26 44 1 4 90 Greece 48 65 2.5 2.5 51 57 51 70 1 2 91 Israel 81 90 3.8 2.7 46 35 46 35 1 1 92 HongKong 89 93 21 2.6 100 100 100 100 1 1 93 Trinidad and Tobago 22 22 06 12 . . . . 0 0 0 0 94 Singapore 100 100 18 13 100 100 100 100 1 1 95 Iran, Islamic Rep. 37 54 5.4 5.0 26 28 26 47 1 6 96 Iraq 51 70 5.7 5.5 35 55 35 70 1 3 High-income oil exporters 36 iv 70 ii' 9.2 w 7.7 iv 29 iv 28 iv Ow 34w 01 3! 97 Oman 4 27 10.8 17.6 . .. 98 Libya 29 63 8.9 7.9 57 64 0 64 0 1 99 Saudi Arabia 39 72 84 7.3 15 18 0 33 0 2 100 Kuwait 75 93 9,3 7,7 75 30 0 0 0 0 101 UnitedArab Emirates 56 79 16.7 10.4 . , . . . Industrial market economies 72w 77 iv 1.8w 1.2 iv 18 iv 18 iv 48 iv 55 iv 1041 1521 102 Spain 61 77 2.5 2.0 13 17 37 44 5 6 103 Ireland 49 57 2.0 22 51 48 51 48 1 1 104 Italy 62 71 14 1.0 13 17 46 52 7 9 105 NewZealand 79 83 19 0.9 25 30 0 30 0 1 106 United Kingdom 87 92 07 02 24 20 61 55 15 17 107 Belgium 86 89 0.9 1.2 17 14 28 24 2 2 108 Austria 51 56 0.8 0.6 51 39 51 39 1 1 109 Netherlands 79 76 0.8 -1.0 9 9 27 24 3 3 110 France 67 81 20 12 25 23 34 34 4 6 111 Japan 67 76 2.4 1.4 18 22 35 42 5 9 112 Finland 44 60 28 19 28 27 0 27 0 1 113 Germany, Fed. Rep. 79 86 1.2 0.3 20 18 48 45 11 11 114 Denmark 77 86 1.3 0.6 40 32 40 32 1 1 115 Australia 83 86 2.6 1.5 26 24 62 68 4 5 116 Sweden 77 86 16 0.7 15 15 15 35 1 3 117 Canada 73 75 19 1.2 14 18 31 62 2 9 118 Norway 37 77 3.4 2.7 50 32 50 32 1 1 119 UnitedStates 72 74 16 1.3 13 12 61 77 40 65 120 Switzerland 53 60 19 08 19 22 19 22 1 1 East European nonmarket economies 52 w 64 w 2.6w 1.8iv 9 iv 7w 23 ii' 32 w 36 I 65 I 121 Hungary 43 55 2.2 14 45 37 45 37 1 1 122 Poland 50 60 1.5 1.8 17 15 41 47 5 8 123 Albania 32 39 3.5 3.2 27 25 0 0 0 0 124 Bulgaria 46 68 3.2 2.1 23 18 23 18 1 1 125 Czechoslovakia 51 66 1.8 1.7 17 12 17 12 1 1 126 German Oem. Rep. 73 76 0.2 0.2 9 9 14 17 2 3 127 Romania 34 52 4.2 3.0 22 17 22 17 1 1 128 USSR 52 66 59 -30 6 4 21 33 25 50 a. Figures in italics are for years other than those specified. 241 Technical notes This ninth edition of the World Development Indi- origin. The data on area are from the FAO Produc- cators provides economic and social indicators for tion Yearbook, 1984. The table in Box A.1 shows periods or selected years in a form suitable for datafor population, area, and the other basic comparing economies and groups of economies. It indicatorsfor U.N. and World Bank member contains three new tables, two covering private countries with populations of less than I million. nonguaranteed debt and one showing receipts of Gross national product (GNP) measures the total official development assistance. domestic and foreign output claimed by residents, The statistics and measures have been carefully and is calculated without making deductions for chosen to give an extensive picture of develop- depreciation. It comprises gross domestic product ment. Considerable effort has been made to stan- (see the note for Table 2) adjusted by net factor dardize the data; nevertheless, statistical methods, income from abroad. That income comprises the coverage, practices, and definitions differ widely. income residents receive from abroad for factor In addition, the statistical systems in many devel- services (labor, investment, and interest) less simi- oping economies are still weak, and this affects the lar payments made to nonresidents who contrib- availability and reliability of the data. Readers are uted to the domestic economy. urged to take these limitations into account in in- The GNP per ca pita figures are calculated accord- terpreting the indicators, particularly when mak- ing to the World Bank Atlas method. The Bank rec- ing comparisons across economies. ognizes that perfect cross-country comparability of All growth rates shown are in constant prices GNP per capita estimates cannot be achieved. Be- and, unless otherwise noted, have been computed yond the classic, strictly intractable "index number by using the least-squares method. The least- problem," two obstacles stand in the way of ade- squares growth rate, r, is estimated by fitting a quate comparability. One concerns GNP numbers least-squares linear trend line to the logarithmic themselves. There are differences in the national annual values of the variable in the relevant pe- accounting systems and in the coverage and relia- riod. More specifically, the regression equation bility of underlying statistical information between takes the form of log X = a + bt + e, where this is various countries. The other relates to the conver- equivalent to the logarithmic transformation of the sion of GNP data, expressed in different national compound growth rate equation, X = X. (1 + r)t. currencies, to a common numéraireconven- In these equations, X is the variable, t is time, and tionally the U.S. dollarto compare them across a = log X. and b = log (1 + r) are the parameters to countries. The Bank's procedure for converting be estimated; e1 is the error term. If b* is the least- GNP to U.S. dollars generally uses a three-year squares estimate of b, then the annual average average of the official exchange rate. For a few growth rate, r, is obtained as [antilog (b*)] 1. countries, however, the prevailing official ex- change rate does not reflect the rate effectively ap- Table 1. Basic indicators plied to actual foreign exchange transactions and in these cases an alternative conversion factor is The estimates of population for mid-1984 are based used. on data from the U.N. Population Division or Recognizing that these shortcomings affect the World Bank sources. In many cases the data take comparability of the GNP per capita estimates, the into account the results of recent population cen- World Bank has introduced several improvements suses. Note that refugees not permanently settled in the estimation procedures. Through its regular in the country of asylum are generally considered review of member countries' national accounts, to be part of the population of their country of the World Bank systematically evaluates the GNP 242 Box A.1 Basic indicators for U.N. and World Bank member countries with populations of less than 1 million GNP per capita Life Area Average annual Average annual expectancy Population (thousands growth rate rate of inflation at birth (thousands) of square Dollars (percent) (percent) (years) U.N.! World Bank member mid-1984 kilometers) 1984 l96S_84 1965-73 1973 -84 1984 Guinea-Bissau 870 36 190 . . 9.1 38 Gambia, The 718 11 260 1.0 3.0 10.4 42 Cape Verde 320 4 320 . . 12.6 64 Sao Tome and Principe 105 1 330 -1.6 . . 8.3 64 Guyana 785 215 590 0.5 4.3 7.8 65 Swaziland 731 17 790 4.1 4.3 14.0 54 St. Vincent and the Grenadines 117 (.) 840 1.9 6.1 10.9 69 Grenada 94 (.) 860 1.7 . . 12.6 68 Dominica 77 1 1,010 0.3 6.1 13.2 75 Belize 156 23 1,110 2.5 . . 7.6 66 St. Lucia 134 1 1,130 3.1 5.5 10.3 70 St. Christopher and Nevis 55 (.) 1,150 3.2 6.4 8.9 64 Fiji 686 18 1,810 3.1 5.6 9.0 65 Antigua and Barbuda 78 (.) 1,860 -0.1 6.6 8.6 73 Malta 360 (.) 3,360 8.4 2.4 5.5 72 Suriname 383 163 3,510 4.2 . . 9.6 66 Cyprus 654 9 3,650 . . 1.6 10.4 74 Gabon 812 268 4,100 5.9 5.8 15.5 50 Barbados 253 (.) 4,370 2.5 7.2 11.7 73 Bahamas 229 14 6,690 -1.6 69 Bahrain 407 1 10,470 . . . 69 Iceland 239 103 11,020 2.6 15.1 47.4 77 Luxembourg 366 3 13,160 3.9 5.0 7.3 73 Qatar 304 11 19,810 -7.7 72 Brunei 218 6 74 Comoros 382 2 55 Djibouti 22 48 Equatorial Guinea 366 28 . . 3.6 44 Maldives 173 (.) . 53 Seychelles 65 (.) . . 14.8 69 Solomon Islands 259 28 4.8 10.1 58 Ton go 106 1 . . . . 10.2 64 Van uatu 130 15 55 Western Samoa 161 3 65 Note: Countries with italicized names are those for which no GNP per capita can be calculated. a. See the technical notes. b. Because data for the entire period are not always available. figures in italics are for periods other than those specified. c. Figures in italics are for 1973-83, not 1973-84. estimates, focusing on the coverage and concepts developed measures of GDP using purchasing- employed and, where appropriate, making adjust- power parities rather than exchange rates. So far ments to improve comparability. The Bank also un- the project covers 60 countries for the year 1980, dertakes a systematic review to assess the appro- but some inherent methodological issues remain priateness of the exchange rates as conversion unresolved. factors. An alternative conversion factor is used The estimates of 1984 GNP and 1984 per capita when the official exchange rate is judged to di- GNP are calculated on the basis of the 1982-84 verge by an exceptionally large margin from the base peridd. With this method, the first step is to rate effectively applied to foreign transactions. calculate the conversion factor. This is done by tak- This applies to only a small number of countries. ing the simple arithmetic average of the actual ex- In an effort to achieve greater comparability, the change rate for 1984 and of adjusted exchange U.N. International Comparison Project (ICP) has rates for 1982 and 1983. To obtain the deflated ex- 243 change rate for 1982, the actual exchange rate for mortality prevailing for all people at the time of its 1982 is multiplied by the relative rate of inflation birth were to stay the same throughout its life. for the country and for the United States between Data are from the U.N. Population Division, sup- 1982 and 1984. For 1983, the actual exchange rate plemented by World Bank estimates. for 1983 is multiplied by the relative rate of infla- The summary measures for GNP per capita and life tion for the country and the United States between expectancy in this table are weighted by popula- 1983 and 1984. tion. Those for average annual rates of inflation are This average of the actual and the deflated ex- weighted by the share of country GDP valued in change rates is intended to smooth the impact of current U.S. dollars for the entire period in the fluctuations in prices and exchange rates. The sec- particular income group. ond step is to convert the GNP at current pur- chaser values and in national currencies of the year Tables 2 and 3. Growth and structure of 1984 by means of the conversion factor as derived production above. Then the resulting GNP in U.S. dollars is divided by the midyear population to derive the Most of the definitions used are those of the U.N. 1984 per capita GNP. The preliminary estimates of System of National Accounts, series F, no. 2, revision 3. GNP per capita for 1984 are shown in this table. Gross domestic product (GDP) measures the total The following formulas describe the procedures final output of goods and services produced by an for computing the conversion factor for year t: economythat is, by residents and nonresidents i Ii', p ) Ip, p \ regardless of the allocation to domestic and foreign (e2,) = - [e,_2 1------- + e,_1 + e,] claims. It is calculated without making deductions 1 for depreciation. For most countries, GDP by in- and for calculating per capita GNP in U.S. dollars dustrial origin is measured at producer prices; for for year t: some countries, purchaser values series are used. (Y) = Y, / N, GDP at producer prices is equal to GDP at pur- chaser values, less import duties. Note that in pre- where, vious editions GDP at producer prices and GDP at 1', = current GNP (local currency) for year purchaser values were referred to as GDP at factor P = GNP deflator for year cost and GDP at market prices, respectively. The e, = annual average exchange rate (local currency/U.S. figures for GDP are dollar values converted from dollars) for year N, = mid-year population for year domestic currency by using the single-year official = U.S. GNP deflator for year exchange rates. For a few countries where the offi- cial exchange rate does not reflect the rate effec- Because of problems associated with the avail- tively applied to actual foreign exchange transac- ability of data and the determination of exchange tions, an alternative conversion factor is used. rates, information on GNP per capita is not shown Note that this procedure does not use the three- for most East European nonmarket economies. year averaging computation used for calculating The average annual rate of inflation is the growth GNP per capita in Table 1. rate of the gross domestic product (GDP) implicit The agricultural sector comprises agriculture, for- deflator, for each of the periods shown. The GDP estry, hunting, and fishing. In developing coun- deflator is first calculated by dividing, for each year tries with high levels of subsistence farming, much of the period, the value of GDP at current pur- of the agricultural production is either not ex- chaser values by the value of GDP at constant pur- changed or not exchanged for money. This in- chaser values, both in national currency. The least- creases the difficulties of measuring the contribu- squares method is then used to calculate the tion of agriculture to GDP. Industry comprises growth rate of the GDP deflator for the period. mining, manufacturing, construction, and electric- This measure of inflation, like any other, has limi- ity, water, and gas. All other branches of economic tations. For some purposes, however, it is used as activity are categorized as services. an indicator of inflation because it is the most National accounts series in domestic currency broadly based deflator, showing annual price units were used to compute the indicators in these movements for all goods and services produced in tables. The growth rates in Table 2 were calculated an economy. from constant price series; the sectoral shares of Life expectancy at birth indicates the number of GDP in Table 3, from current price series. years a newborn infant would live if patterns of In calculating the summary measures for each mdi- 244 cator in Table 2, constant U.S. dollar values for cedure, as described in the technical notes for Ta- each country are first calculated for each of the bles 2 and 3. The growth rates of the constant price years of the periods covered, and the values are series in national currencies are applied to the 1980 then aggregated for each year. The least-squares value added in U.S. dollars to derive the values, in procedure is used to compute the summary mea- 1980 U.S. dollars, for 1970 and 1984. sure. The average sectoral percentage shares in Ta- The figures for the remainder of this table are ble 3 are computed from group aggregates of sec- from the Food and Agriculture Organization toral GDP in current U.S. dollars. (FAO). Cereal imports and food aid in cereals are measured Tables 4 and 5. Growth of consumption and in grain equivalents and defined as comprising all investment; structure of demand cereals under the Standard International Trade Classification (SITC), Revision 1, Groups 041-046. GDP is defined in the note for Table 2. The figures are not directly comparable since cereal General government consumption includes all cur- imports are based on calendar-year and recipient- rent expenditure for purchases of goods and ser- country data, whereas food aid in cereals is based vices by all levels of government. Capital expendi- on data for crop years from donor countries. ture on national defense and security is regarded Where data are for 1974, they provide the earliest as consumption expenditure. available information. Private consumption is the market value of all Fertilizer consumption is measured in relation to goods and services purchased or received as in- arable land, defined as comprising arable land and come in kind by households and nonprofit institu- land under permanent crops. This includes land tions. It excludes purchases of dwellings but in- under temporary crops (double-cropped areas are cludes imputed rent for owner-occupied counted once), temporary meadows for mowing or dwellings. pastures, land under market or kitchen gardens, Gross domestic investment consists of the outlays land temporarily fallow or lying idle, as well as for additions to the fixed assets of the economy, land under permanent crops. plus net changes in the value of inventories. The index of food production per capita shows the Gross domestic savings are calculated by deducting average annual quantity of food produced per cap- total consumption from gross domestic product. ita in 1982-84 in relation to that in 1974-76. The Exports of goods and non factor services represent the estimates are derived by dividing the quantity of value of all goods and nonfactor services sold to food production by total population. For this in- the rest of the world; they include merchandise, dex, food is defined as comprising cereals, starchy freight, insurance, travel, and other nonfactor roots, sugar cane, sugar beet, pulses, edible oils, services. The value of factor services, such as in- nuts, fruits, vegetables, livestock, and livestock vestment income, interest, and labor income, is products. Quantities of food production are mea- excluded. sured net of animal feed, seeds for use in agricul- The resource balance is the difference between ex- ture, and food lost in processsing and distribution. ports of goods and nonfactor services and imports The summary measures for fertilizer consumption of goods and nonfactor services. are weighted by total arable land area. The sum- National accounts series were used to compute mary measures for food production are weighted by the indicators in these tables. The growth rates in population. Table 4 were calculated from constant price series; the shares of GDP in Table 5, from current price Table 7. Industry series. The summary measures are calculated by the The percentage distribution of value added among method explained in the notes for Tables 2 and 3. manufacturing industries was provided by the United Nations Industrial Development Organiza- Table 6. Agriculture and food tion (UNIDO). UNIDO industrial statistics have been used for calculating the shares with the base The basic data for value added in agriculture are from values expressed in 1980 dollars. the World Bank's national accounts series in na- The classification of manufacturing industries is tional currencies. The 1980 value added in current in accord with the U.N. International Standard In- prices in national currencies is converted to U.S. dustrial Classification of All Economic Activities (ISIC). dollars by applying the single-year conversion pro- Food and agriculture comprise ISIC Major Groups 245 311, 313, and 314; textiles and clothing 321-24; ma- group aggregates for energy imports and merchan- chinery and transport equipment 382-84; and chemi- dise exports in current dollars. cals 351 and 352. Other manufacturing generally comprises ISIC Major Division 3, less all of the above; however, for some economies for which Table 9. Growth of merchandise trade complete data are not available, other categories are included as well. The statistics on merchandise trade, Tables 9 The basic data for value added in manufacturing are through 13, are from U.N. publications and the from the World Bank's national accounts series in U.N. trade data system, supplemented by statis- national currencies. The 1980 value added in cur- tics from the U.N. Conference on Trade and Devel- rent prices in national currencies is converted to opment (UNCTAD), the International Monetary U.S. dollars by applying the conversion procedure Fund (IMF), and, in a few cases, World Bank coun- described in technical notes for Tables 2 and 3. The try documentation. Values in these tables are in growth rates of the constant price series in national current U.S. dollars. currencies are applied to the 1980 value added in Merchandise exports and imports, with some excep- U.S. dollars to derive the values, in 1980 U.S. dol- tions, cover international movements of goods lars, for 1970 and 1983. across customs borders. Exports are valued f.o.b. (free on board), imports c.i.f. (cost, insurance, and freight), unless otherwise specified in the forego- Table 8. Commercial energy ing sources. These values are in current dollars; The data on energy are from U.N. sources. They note that they do not include trade in services. refer to commercial forms of primary energy: pe- The growth rates of merchandise exports and imports troleum and natural gas liquids, natural gas, solid are in real terms and calculated from quantum in- fuels (coal, lignite, and so on), and primary elec- dices of exports and imports. Quantum indices are tricity (nuclear, geothermal, and hydroelectric obtained from the export or import value index as power)all converted into oil equivalents. Figures deflated by the corresponding price index. These on liquid fuel consumption include petroleum de- indices are obtained from different sources. For rivatives that have been consumed in nonenergy about 40 developing economies, mostly major ex- uses. For converting primary electricity into oil porters of manufactures, the indices are from the equivalents, a notional thermal efficiency of 34 per- World Bank data file. To calculate these quantum cent has been assumed. The use of firewood and indices, the World Bank has used its own price other traditional fuels, though substantial in some indices, which are based on international prices for developing countries, is not taken into account be- primary commodities and unit value indices for cause reliable and comprehensive data are not manufactures. These price indices are both available. country-specific and disaggregated by commodity Energy imports refer to the dollar value of energy groups, which ensures consistency between data importsSection 3 in the Standard International for a group of countries and those for individual Trade Classification (SITC), Revision 1and are countries. Such data consistency will increase as expressed as a percentage of earnings from mer- the World Bank improves its trade price indices for chandise exports. an increasing number of countries. For the remain- Because data on energy imports do not permit a ing developing economies these indices are from distinction between petroleum imports for fuel UNCTAD. For industrial economies the indices are and for use in the petrochemicals industry, these from the U.N. Yearbook of International Trade Statis- percentages may overestimate the dependence on tics and Monthly Bulletin of Statistics, and the IMF imported energy. International Financial Statistics. The summary measures of energy production and The terms of trade, or the net barter terms of consumption are computed by aggregating the re- trade, measure the relative level of export prices spective volumes for each of the years covered by compared to import prices. Calculated as the ratio the time periods, and then applying the least- of a country's index of average export price to the squares growth rate procedure. For energy con- average import price index, this indicator shows sumption per capita, population weights are used to changes over a base year in the level of export compute summary measures for the specified years. prices as a percentage of import prices. The terms- The summary measures of energy imports as a per- of-trade index numbers are shown for 1982 and centage of merchandise exports are computed from 1984, with 1980 = 100. The price indices are from 246 the sources cited above for the growth rates of ex- tries in current dollars; those in Table 11, by total ports and imports. merchandise imports of individual countries in The summary measures are calculated by aggregat- current dollars. (See note to Table 9.) ing the 1980 constant U.S. dollar price series for each year, and then applying the least-squares Table 12. Origin and destination of merchandise growth rate procedure for the periods shown. exports Note again that these values do not include trade in services. Merchandise exports are defined in the note for Table 9. Trade shares in this table are based on statistics Tables 10 and 11. Structure of merchandise trade on the value of trade in current dollars from the U.N. and the IMF. Industrial market economies also The shares in these tables are derived from trade include Gibraltar, Iceland, and Luxembourg; high- Values in current dollars reported in the U.N. trade income oil exporters also include Bahrain, Brunei, data system and the U.N. Yearbook of International and Qatar. Trade Statistics, supplemented by other regular sta- The summary measures are weighted by the value tistical publications of the U.N. and the IMF. of total merchandise exports of individual coun- Merchandise exports and imports are defined in the tries in current dollars. note for Table 9. The categorization of exports and imports fol- Table 13. Origin and destination of manufactured lows the Standard International Trade Classifica- exports tion (SITC), Revision 1. In Table 10, fuels, minerals, and metals are the com- The data in this table are from the U.N. and are modities in SITC Section 3 (mineral fuels and lubri- among those used to compute special Table B in cants and related materials), Divisions 27 and 28 the U.N.Yearbook of International Trade Statistics. (minerals and crude fertilizers, and metalliferous Manufactured goods are the commodities in SITC, ores) and Division 68 (nonferrous metals). Other Revision 1, Sections 5 through 9 (chemicals and primary commodities comprise SITC Sections 0, 1, 2, related products, basic manufactures, manufac- and 4 (food and live animals, beverages and to- tured articles, machinery and transport equip- bacco, inedible crude materials, oils, fats, and ment, and other manufactured articles and goods waxes) less Divisions 27 and 28. Textiles and clothing not elsewhere classified) excluding Division 68 represent SITC Divisions 65 and 84 (textiles, yarns, (nonferrous metals). fabrics, and clothing). Machinery and transport The country groups are the same as those in Ta- equipment are the commodities in SITC Section 7. ble 12. The summary measures are weighted by man- Other manufactures, calculated as the residual from ufactured exports of individual countries in cur- the total value of manufactured exports, represent rent dollars. SITC Sections 5 through 9 less Section 7 and Divi- sions 65, 68, and 84. Table 14. Balance of payments and reserves In Table 11, food commodities are those in SITC Sections 0, 1, and 4 and Division 22 (food and live Values in this table are in current U.S. dollars. animals, beverages, oils and fats, and oilseeds and The current account balance is the difference be- nuts), less Division 12 (tobacco). Fuels are the com- tween (1) exports of goods and services plus in- modities in SITC Section 3 (mineral fuels and lubri- flows of unrequited official and private transfers cants and related materials). Other primary commod- and (2) imports of goods and services plus unre- ities comprise SITC Section 2 (crude materials quited transfers to the rest of the world. The cur- excluding fuels), less Division 22 (oilseeds and rent account balance estimates are primarily from nuts) plus Division 12 (tobacco) and Division 68 IMF data files and conform to the IMF Balance of (nonferrous metals). Machinery and transport equip- Payments Manual definitions. ment are the commodities in SITC Section 7. Other Workers' remittances cover remittances of income manufactures, calculated as the residual from the by migrants who are employed or expect to be em- total value of manufactured imports, represent ployed for more than a year in their new economy, SITC Sections 5 through 9 less Section 7 and Divi- where they are considered residents. Those de- sion 68. rived from shorter-term stays are included in pri- The summary measures in Table 10 are weighted vate transfers. by total merchandise exports of individual coun- Net direct private investment is the net amount in- 247 vested or reinvested by nonresidents in enter- mation) for an additional twenty-four countries. prises in which they or other nonresidents exercise External public debt outstanding and disbursed repre- significant managerial control. Including equity sents public and publicly guaranteed loans drawn capital, reinvested earnings, and other capital, at year-end, net of repayments of principal and these net figures also take into account the value of write-offs at year-end. For estimating external pub- direct investment abroad by residents of the re- lic debt as a percentage of GNP, the debt figures porting country. These estimates were compiled are converted into U.S. dollars from currencies of primarily from IMF data files. repayment at end-of-year official exchange rates. Gross international reserves comprise holdings of GNP is converted from national currencies to U.S. monetary gold, special drawing rights (SDR5), the dollars by applying the conversion procedure de- reserve position of IMF members in the Fund, and scribed in the technical notes for Tables 2 and 3. holdings of foreign exchange under the control of In addition to public long-term debt and private monetary authorities. The data on holdings of in- nonguaranteed long-term debt (whether reported ternational reserves are from IMF data files. The or estimated), this table includes information on gold component of these reserves is valued the use of IMF credit and estimates of short-term throughout at year-end London prices: that is, debt. $37.37 an ounce in 1970 and $308.30 an ounce in Use of IMF credit denotes repurchase obligations 1984. The reserve levels for 1970 and 1984 refer to to the IMF for all uses of IMF resources, excluding the end of the year indicated and are in current those resulting from drawings in the reserve dollars at prevailing exchange rates. Due to differ- tranche and on the IMF Trust Fund It is shown for ences in the definition of international reserves, in the end of the year specified. It comprises pur- the valuation of gold, and in reserve management chases outstanding under the credit tranches, in- practices, the levels of reserve holdings published cluding enlarged access resources, and all of the in national sources do not have strictly comparable special facilities (the buffer stock, compensatory fi- significance. Reserve holdings at the end of 1984 nancing, extended Fund, and oil facilities). Trust are also expressed in terms of the number of Fund loans are included individually in the Debtor months of imports of goods and services they Reporting System, and thus shown within the to- could pay for, with imports at the average level for tal of public long-term debt. Use of IMF credit out- 1983 or 1984. standing at year-end (a stock) is converted to U.S. The summary measures are computed from group dollars at the dollar/SDR exchange rate in effect at aggregates for gross international reserves and to- year-end. tal imports of goods and services in current dol- Short-term external debt is debt having an original lars. maturity of one year or less. Available data permit no distinctions between public and private non- Table 15. Gross external liabilities guaranteed short-term debt. Gross external liabilities are defined for the pur- The data on debt in this and successive tables are pose of this report as the sum of public long-term from the World Bank Debtor Reporting System, debt, private nonguaranteed long-term debt, use supplemented by World Bank estimates. That sys- of IMF credit, and short-term debt. This is a gross tem is concerned solely with developing econo- stock because external liabilities are not offset mies and does not collect data on external debt for against associated external assets. other groups of borrowers, nor from economies that are not members of the World Bank. The dol- Table 16. Flow of public and private external lar figures on debt shown in Tables 15 through 19 capital are in U.S. dollars converted at official exchange rates. In previous reports, debt with an original or Data on the gross inflow (disbursements) and repay- extended maturity of more than a year was re- ment of principal (amortization) are for public, pub- ferred to as "medium- and long-term." To con- licly guaranteed, and private nonguaranteed long- form to current usage, this debt is now denoted as term loans. The net inflow estimates are "long-term." disbursements less the repayment of principal. In this edition, the data on debt cover for the first Public loans are external obligations of public time private nonguaranteed debt reported by debtors, including the national government, its twenty developing countries, and complete or par- agencies, and autonomous public bodies. Publicly tial estimates (depending on the reliability of infor- guaranteed loans are external obligations of private 248 debtors that are guaranteed for repayment by a pal drawn and outstanding. The maturity of a loan public entity. These two categories are aggregated is the interval between the agreement date, when a in the tables. Private nonguaranteed loans are exter- loan agreement is signed or bonds are issued, and nal obligations of private debtors that are not guar- the date of final repayment of principal. The grace anteed for repayment by a public entity. period is the interval between the agreement date and the date of the first repayment of principal. Table 17. Total external public and private debt Public loans with variable interest rates, as a percent- and debt service ratios age of public debt, refer to interest rates that float with movements in a key market rate; for example, Total long-term debt data in this table cover public the London interbank offered rate (LIBOR) or the and publicly guaranteed debt and private non- U.S. prime rate. This column shows the borrow- guaranteed debt. Procedures for estimating total er's exposure to changes in international interest long-term debt as a percentage of GNP, average rates. ratios of debt service to GNP, and average ratios of The summary measures in this table are weighted debt service to exports of goods and services are by the amounts of the loans. the same as those described in the notes for Table 15. Table 20. Official development assistance from OECD and OPEC members Table 18. External public debt and debt-service Official development assistance (ODA) consists of net ratios disbursements of loans and grants made on con- Interest payments are actual payments made on the cessional financial terms by official agencies of the disbursed and outstanding public and publicly members of the Development Assistance Commit- guaranteed debt in foreign currencies, goods, or tee (DAC) of the Organisation for Economic Co- services; they include commitment charges on un- operation and Development (OECD) and members disbursed debt if information on those charges is of the Organization of Petroleum Exporting Coun- available. tries (OPEC), with the object of promoting eco- Debt service is the sum of actual repayments of nomic development and welfare. It includes the principal (amortization) and actual payments of in- value of technical cooperation and assistance. All terest made in foreign currencies, goods, or serv- data shown were supplied by the OECD, and all ices on external public and publicly guaranteed U.S. dollar values converted at official exchange debt. The ratio of debt service to exports of goods rates. and services is one of several conventional mea- Amounts shown are net disbursements to devel- sures used to assess the ability to service debt. The oping countries and multilateral institutions. The average ratios of debt service to GNP for the econ- disbursements to multilateral institutions are now omy groups are weighted by GNP in current dol- reported for all DAC members on the basis of the lars. The average ratios of debt service to exports of date of issue of notes; some DAC members previ- goods and services are weighted by exports of ously reported on the basis of the date of encash- goods and services in current dollars. ment. Net bilateral flows to low-income economies ex- The summary measures are computed from group clude unallocated bilateral flows and all aggregates of debt service and GNP in current dol- disbursements to multilateral institutions. lars. The nominal values shown in the summary for ODA from OECD countries were converted into Table 19. Terms of external public borrowing 1980 prices using the dollar GNP deflator. This de- flator is based on price increases in OECD coun- Commitments refer to the public and publicly guar- tries (excluding Greece, Portugal, and Turkey) anteed loans for which contracts were signed in measured in dollars. It takes into account the par- the year specified. They are reported in currencies ity changes between the dollar and national cur- of repayment and converted into U.S. dollars at rencies. For example, when the dollar appreciates, average annual official exchange rates. price changes measured in national currencies Figures for interest rates, maturities, and grace pe- have to be adjusted downward by the amount of riods are averages weighted by the amounts of the the appreciation to obtain price changes in dollars. loans. Interest is the major charge levied on a loan The table, in addition to showing totals for and is usually computed on the amount of princi- OPEC, shows totals for the Organization of Arab 249 Petroleum Exporting Countries (OAPEC). The do- comparable for a number of reasons. In many nor members of OAPEC are Algeria, Iraq, Kuwait, economies private health and education services Libya, Qatar, Saudi Arabia, and United Arab Emir- are substantial; in others public services represent ates. ODA data for OPEC and OAPEC were also the major component of total expenditure but may obtained from the OECD. be financed by lower levels of government. Great caution should therefore be exercised in using the Table 21. Official development assistance: data for cross-country comparisons. receipts Central government expenditure comprises the ex- penditure by all government offices, departments, Net disbursements of ODA from all sources consist of establishments, and other bodies that are agencies loans and grants made on concessional financial or instruments of the central authority of a coun- terms by all bilateral official agencies and multila- try. It includes both current and capital (develop- teral sources, with the object of promoting eco- ment) expenditure. nomic development and welfare. The disburse- Defense comprises all expenditure, whether by ments shown in this table are not strictly defense or other departments, on the maintenance comparable with those shown in Table 20 since the of military forces; including the purchase of mili- receipts are from all sources; disbursements in Ta- tary supplies and equipment, construction, re- ble 20 refer to those made by members of OECD cruiting, and training. Also in this category is ex- and OPEC only. Net disbursements equal gross penditure on strengthening public services to meet disbursements less payments to donors for amorti- wartime emergencies, on training civil defense zation. Net disbursements of ODA are shown per personnel, on supporting research and develop- capita and as a percentage of GNP. ment, and on funding administration of military The summary measures of per capita ODA are aid programs. computed from group aggregates for population Education comprises expenditure on the provi- and for ODA. Summary measures for ODA as a sion, management, inspection, and support of pre- percentage of GNP are computed from group to- primary, primary, and secondary schools; of uni- tals for ODA and for GNP in current U.S. dollars. versities and colleges; and of vocational, technical, and other training institutions by central govern- Table 22. Central government expenditure ments. Also included is expenditure on the general administration and regulation of the education The data on central government finance in Tables system; on research into its objectives, organiza- 22 and 23 are from the IMF Government Finance tion, administration, and methods; and on such Statistics Yearbook, 1986, IMF data files, and World subsidiary services as transport, school meals, and Bank country documentation. The accounts of medical and dental services in schools. each country are reported using the system of Health covers public expenditure on hospitals, common definitions and classifications found in medical and dental centers, and clinics with a ma- the IMF Manual on Government Finance Statistics. jor medical component; on national health and Due to differences in coverage of available data, medical insurance schemes; and on family plan- the individual components of central government ning and preventive care. Also included is expen- expenditure and current revenue shown in these diture on the general administration and regula- tables may not be strictly comparable across all tion of relevant government departments, economies. The shares of total expenditure and hospitals and clinics, health and sanitation, and revenue by category are calculated from national national health and medical insurance schemes; currencies. and on research and development. The inadequate statistical coverage of state, pro- Housing and community amenities and social security vincial, and local governments has dictated the use and welfare cover (1) public expenditure on hous- of central government data only. This may seri- ing, such as income-related schemes, on provision ously understate or distort the statistical portrayal and support of housing and slum clearance activi- of the allocation of resources for various purposes, ties, on community development, and on sanitary especially in large countries where lower levels of services; and (2) public expenditure on compensa- government have considerable autonomy and are tion to the sick and temporarily disabled for loss of responsible for many social services. income; on payments to the elderly, the perma- It must be emphasized that the data presented, nently disabled, and the unemployed; and on fam- especially those for education and health, are not ily, maternity, and child allowances. The second 250 category also includes the cost of welfare services cial security contributions as well as those of self- such as care of the aged, the disabled, and chil- employed and unemployed persons. Domestic taxes dren, as well as the cost of general administration, on goods and services include general sales, turnover, regulation, and research associated with social se- or value added taxes, selective excises on goods, curity and welfare services. selective taxes on services, taxes on the use of Economic services comprise public expenditure as- goods or property, and profits of fiscal monopo- sociated with the regulation, support, and more lies. Taxes on international trade and transactions in- efficient operation of business, economic develop- clude import duties, export duties, profits of ex- ment, redress of regional imbalances, and creation port or import marketing boards, transfers to of employment opportunities. Research, trade pro- government, exchange profits, and exchange motion, geological surveys, and inspection and taxes. Other taxes include employers' payroll or regulation of particular industry groups are among manpower taxes, taxes on property, and other the activities included. The five major categories of taxes not allocable to other categories. economic services are fuel and energy, agriculture, Current nontax revenue comprises all government industry, transportation and communication, and revenue that is not a compulsory nonrepayable other economic affairs and services. payment for public purposes. Proceeds of grants Other covers expenditure on the general admin- and borrowing, funds arising from the repayment istration of government not included elsewhere; of previous lending by governments, incurrence of for a few economies it also includes amounts that liabilities, and proceeds from the sale of capital as- could not be allocated to other components. sets are not included. Overall surplus/deficit is defined as current and The summary measures for the components of cur- capital revenue and grants received, less total ex- rent revenue are computed from group totals for penditure less lending minus repayments. revenue components and total current revenue in The summary measures for the components of cen- current dollars; those for current revenue as a per- tral government expenditure are computed from centage of GNP are computed from group totals group totals for expenditure components and cen- for total current revenue and GNP in current dol- tral government expenditure in current dollars. lars. Those for total expenditure as a percentage of GNP and for overall surplus/deficit as a percentage of Table 24. Income distribution GNP are computed from group totals for the above total expenditures and overall surplus/deficit in The data in this table refer to the distribution of current dollars, and GNP in current dollars, re- total disposable household income accruing to per- spectively. centile groups of households ranked by total household income. The distributions cover rural Table 23. Central government current revenue and urban areas and refer to different years be- tween 1970 and 1982. Information on data sources and comparability is The data for income distribution are drawn from given in the note for Table 22. Current revenue by a variety of sources including the Economic Com- source is expressed as a percentage of total current mission for Latin America and the Caribbean revenue, which is the sum of tax revenue and cur- (ECLAC), Economic and Social Commission for rent nontax revenue, and is calculated from na- Asia and the Pacific (ESCAP), International Labour tional currencies. Organisation (ILO), the Organisation for Economic Tax revenue is defined as all government revenue Co-operation and Development (OECD), the U.N. from compulsory, unrequited, nonrepayable re- Survey of National Sources of Income Distribution Sta- ceipts for public purposes, including interest col- tistics, 1981, and National Account Statistics: Compen- lected on tax arrears and penalties collected on diums of Income Distribution Statistics, 1985, more nonpayment or late payment of taxes. Tax revenue recent U.N. data, the World Bank, and national is shown net of refunds and other corrective trans- sources. actions. Taxes on income, profit, and capital gain are Because the collection of data on income distri- taxes levied on the actual or presumptive net in- bution has not been systematically organized and come of individuals, on the profits of enterprises, integrated with the official statistical system in and on capital gains, whether realized on land many countries, estimates are derived from sur- sales, securities, or other assets. Social Security con- veys designed for other purposes, most often con- tributions include employers' and employees' so- sumer expenditure surveys, which also collect 251 some information on income. These surveys use a ing her lifetime, assuming fixed age-specific fertil- variety of income concepts and sample designs. ity and mortality rates. The NRR thus measures Furthermore, the coverage of many of these sur- the extent to which a cohort of newborn girls will veys is too limited to provide reliable nationwide reproduce themselves under given schedules of estimates of income distribution. Thus, although fertility and mortality. An NRR of 1 indicates that the estimates shown are considered the best avail- fertility is at replacement level: at this rate child- able, they do not avoid all these problems and bearing women, on average, bear only enough should be interpreted with extreme caution. daughters to replace themselves in the population. The scope of the indicator is similarly limited. A stationary population is one in which age- and Because households vary in size, a distribution in sex-specific mortality rates have not changed over which households are ranked according to per cap- a long period, while age-specific fertility rates have ita household income, rather than according to to- simultaneously remained at replacement level tal household income, is superior for many pur- (NRR=1). In such a population, the birth rate is poses. The distinction is important because constant and equal to the death rate, the age struc- households with low per capita incomes fre- ture is constant, and the growth rate is zero. quently are large households, whose total income Population Momentum is the tendency for popula- may be high, and conversely many households tion growth to continue beyond the time that with low household incomes may be small house- replacement-level fertility has been achieved; that holds with high per capita incomes. Information is, even after NRR has reached 1. The momentum on the distribution of per capita household income of a population in the year t is measured as a ratio exists for only a few countries. The World Bank's of the ultimate stationary population in the year t, Living Standards Measurement Study is develop- given the assumption that fertility remains at re- ing procedures and applications that can assist placement level from the year t onward. For exam- countries to improve their collection and analysis ple, the 1985 population of India is estimated at 765 of data on income distribution. million. If NRR had reached 1 in 1985, the pro- jected stationary population would be 1,349 Table 25. Population growth and projections millionreached in the middle of the 22nd centuryand the population momentum would be The growth rates of population are period averages 1.8. calculated from midyear populations. A population tends to grow even after fertility The estimates of population for mid-1984 are has declined to replacement level because past based on data from the U.N. Population Division high growth rates will have produced an age distri- and from World Bank sources. In many cases the bution with a relatively high proportion of women data take into account the results of recent popula- in, or still to enter, the reproductive ages. Conse- tion censuses. Note again that refugees not perma- quently, the birth rate will remain higher than the nently settled in the country of asylum are gener- death rate and the growth rate will remain positive ally considered to be part of the population of their for several decades. It takes at least 50-75 years, country of origin. depending on the initial conditions, for a popula- The projections of population for 1990 and 2000, tion's age distribution to adjust fully to changed and to the year in which it will eventually become fertility rates. stationary, are made for each economy separately. To make the projections, assumptions about fu- Starting with information on total population by ture mortality rates are made in terms of female life age and sex, fertility rates, mortality rates, and in- expectancy at birth (that is, the number of years a ternational migration in the base year 1980, these newborn girl would live if subject to the mortality parameters are projected at five-year intervals on risks prevailing for the cross-section of population the basis of generalized assumptions, until the at the time of her birth). Economies are divided population becomes stationary. The base-year esti- according to whether their primary-school enroll- mates are from updated computer printouts of the ment ratio for females is above or below 70 per- U.N. World Population Prospects as Assessed in 1982, cent. In each group a set of annual increments in from the most recent issues of the U.N. Population female life expectancy is assumed, depending on and Vital Statistics Report, from World Bank country the female life expectancy in 1980-85. For a given data, and from national censuses. life expectancy at birth, the annual increments dur- The net reproduction rate (NRR) indicates the ing the projection period are larger in economies number of daughters a newborn girl will bear dur- with a higher primary-school enrollment ratio and 252 a life expectancy of up to 62.5 years. At higher life of live births and deaths per thousand population expectancies, the increments are the same. in a year. They come from the sources mentioned To project fertility rates, the year in which fertil- in the note for Table 25. Percentage changes are ity will reach replacement level is estimated. These computed from unrounded data. estimates are speculative and are based on infor- The total fertility rate represents the number of mation on trends in crude birth rates (defined in children that would be born per woman, if she the note for Table 20), total fertility rates (also de- were to live to the end of her childbearing years fined in the note for Table 20), female life expect- and bear children at each age in accordance with ancy at birth, and the performance of family plan- prevailing age-specific fertility rates. The rates ning programs. For most economies it is assumed given are from the sources mentioned in the note that the total fertility rate will decline between 1980 for Table 25. and the year of reaching a net reproduction rate of The percentage of married women of childbearing age 1, after which fertility will remain at replacement using contraception refers to women who are prac- level. For most countries in sub-Saharan Africa, ticing, or whose husbands are practicing, any form and for a few countries in Asia and the Middle of contraception. These generally comprise female East, total fertility rates are assumed to remain and male sterilization, injectable and oral contra- constant for some time and then to decline until ceptives, intrauterine devices (JUD), diaphragms, replacement level is reached; for a few countries spermicides, condoms, rhythm, withdrawal, and they are assumed to increase until 1990-95 and abstinence. Women of childbearing age are generally then to decline. women aged 15-49, although for some countries In some countries, fertility is already below re- contraceptive usage is measured for other age placement level or will decline to below replace- groups. ment level during the next 5 to 10 years. Because a Data are mainly derived from the World Fertility population will not remain stationary if its net re- Survey, the Contraceptive Prevalence Survey, production rate is other than 1, it is assumed that World Bank country data, and the U.N. report: fertility rates in these economies will regain re- Recent Levels and Trends of Contraceptive Use as As- placement levels in order to make estimates of the sessed in 1983. For a few countries for which no stationary population for them. For the sake of survey data are available, program statistics are consistency with the other estimates, the total fer- used; these include Bangladesh, India, Indonesia, tility rates in the industrial economies are assumed and several African countries. Program statistics to remain constant until 1985-90 and then to in- may understate contraceptive prevalence because crease to replacement level by 2010. they do not measure use of methods such as International migration rates are based on past rhythm, withdrawal, or abstinence, or contracep- and present trends in migration flow. The esti- tives not obtained through the official family plan- mates of future net migration are speculative. For ning program. The data refer to a variety of years, most economies the net migration rates are as- generally not more than two years distant from sumed to be zero by 2000, but for a few they are those specified. assumed to be zero by 2025. All summary measures are country data weighted The estimates of the hypothetical size of the sta- by each country's share in the aggregate popula- tionary population and the assumed year of reach- tion. ing replacement-level fertility are speculative. They should not be regarded as predictions. They are in- Table 27. Life expectancy and related indicators cluded to show the long-run implications of recent fertility and mortality trends on the basis of highly Life expectancy at birth is defined in the note for stylized assumptions. A fuller description of the Table 1. methods and assumptions used to calculate the es- The infant mortality rate is the number of infants timates is available from the Bank publication: who die before reaching one year of age, per thou- World Population Projections 1985Short- and Long- sand live births in a given year. The data are from a term Estimates by Age and Sex with Related Demo- variety of U.N. sources"Infant Mortality: World graphic Statistics. Estimates and Projections, 1950-2025" in Popula- tion Bulletin of the United Nations (1983) and recent Table 26. Demography and fertility issues of Demographic Yearbook and Population and Vital Statistics Reportand from the World Bank. The crude birth and death rates indicate the number The child death rate is the number of deaths of 253 children aged 1-4 per thousand children in the expressed as percentages of the total, male, or fe- same age group in a given year. Estimates are male populations of the primary school age to give based on the data on infant mortality and on the gross primary enrollment ratios. While many relationship between the infant mortality rate and countries consider primary school age to be 6-11 the child death rate implicit in the appropriate years, others do not. The differences in country Coale-Demeny Model life tables; see Ansley J. practices in the ages and duration of schooling are Coale and Paul Demeny, Regional Model Life Tables reflected in the ratios given. For some countries and Stable Populations (Princeton, NJ: Princeton with universal primary education, the gross enroll- University Press, 1966). ment ratios may exceed or fall below 100 percent The summary measures in this table are country because some pupils are above or below the coun- figures weighted by each country's share in the try's standard primary-school age. aggregate population. The data on number enrolled in secondary school are calculated in the same manner, with secondary- Table 28. Health-related indicators school age considered to be 12-17 years. The data on number enrolled in higher education are The estimates of population per physician and nursing from Unesco. person are derived from World Health Organization The summary measures in this table are country (WHO) data. They also take into account revised enrollment rates weighted by each country's share estimates of population. Nursing persons include in the aggregate population. graduate, practical, assistant, and auxiliary nurses; the inclusion of auxiliary nurses allows for a better Table 30. Labor force estimation of the availability of nursing care. Be- cause definitions of nursing personnel varyand The population of working age refers to the popula- because the data shown are for a variety of years, tion aged 15-64. The estimates are based on the generally not more than two years distant from population estimates of the World Bank for 1984 those specifiedthe data for these two indicators and previous years. are not strictly comparable across countries. The summary measures are weighted by popula- The daily calorie supply per capita is calculated by tion. dividing the calorie equivalent of the food supplies The labor force comprises economically active per- in an economy by the population. Food supplies sons aged 10 years and over, including the armed comprise domestic production, imports less ex- forces and the unemployed, but excluding house- ports, and changes in stocks; they exclude animal wives, students, and other economically inactive feed, seeds for use in agriculture, and food lost in groups. Agriculture, industry, and services are de- processing and distribution. The daily calorie re- fined in the same manner as in Table 2. The esti- quirement per capita refers to the calories needed to mates of the sectoral distribution of the labor force sustain a person at normal levels of activity and are from the International Labour Organisation health, taking into account age and sex distribu- (ILO), Labour Force Estimates and Projections, 1950- tions, average body weights, and environmental 2000, 3rd edition, and from the World Bank. temperatures. Because no later figures are avail- The summary measures are weighted by labor able, 1977 calorie requirement data are used for force. these calculations. Both sets of estimates are from The labor force growth rates are derived from the the Food and Agriculture Organization (FAO). Bank's population projections and from ILO data The summary measures in this table are country on age-specific activity rates in the source cited figures weighted by each country's share in the above. aggregate population. The application of ILO activity rates to the Bank's latest population estimates may be inap- Table 29. Education propriate for some economies in which there have been important changes in unemployment and un- The data in this table refer to a variety of years, deremployment, in international and internal mi- generally not more than two years distant from gration, or in both. The labor force projections for those specified, and are mostly from Unesco. 1980-2000 should thus be treated with caution. The data on number enrolled in primary school refer The summary measures for 1965-73 and 1973-84 to estimates of total, male, and female enrollment are country growth rates weighted by each coun- of students of all ages in primary school; they are try's share in the aggregate labor force in 1973; 254 those for 1980-2000, by each country's share in the lated from the sources cited above. Data on urban aggregate labor force in 1980. agglomeration are from the U.N. Patterns of Urban and Rural Population Growth, 1980. Because the estimates in this table are based on Table 31. Urbanization different national definitions of what is "urban," The data on urban population as a percentage of total cross-country comparisons should be interpreted population are from the U.N. Estimates and Projec- with caution. tions of Urban, Rural and City Populations 1950-2025: The summary measures for urban population as a The 1982 Assessment, 1985, supplemented by data percentage of total population are calculated from from various issues of the U.N. Demographic Year- country percentages weighted by each country's book, and from the World Bank. share in the aggregate population; the other sum- The growth rates of urban population are calculated mary measures in this table are weighted in the from the World Bank's population estimates; the same fashion, using urban population. estimates of urban population shares are calcu- 255 Bibliography of data sources National International Monetary Fund. 1985. Government Finance Statistics Yearbook. Vol. IX. accounts and Washington, D.C.. economic Sawyer, Malcolm. 1976. Income Distribution in OECD Countries. OECD Occasional Studies. indicators Paris. U.N. Department of International Economic and Social Affairs. Various years. Statistical Yearbook. New York. 1981. A Survey of National Sources of Income Distribution Statistics. Statistical Papers, series M, no. 72. New York. 1985. National Accounts Statistics: Compendium of Income Distribution Statistics. Statistical Papers, series M, no. 79. New York. FAQ, IMF, and UNIDO data files. National sources. World Bank country documentation. World Bank data files. Energy U.N. Department of International Economic and Social Affairs. Various years. World Energy Supplies. Statistical Papers, Series J. New York. World Bank data files. Trade International Monetary Fund. Various years. Direction of Trade Statistics. Washington, D.C.. Various years. International Financial Statistics. Washington, D.C.. U.N. Conference on Trade and Development. Various years. Handbook of International Trade and Development Statistics. Geneva. U.N. Department of International Economic and Social Affairs. Various years. Monthly Bulletin of Statistics. New York. Various years. Yearbook of International Trade Statistics. New York. FAQ, IMF, and World Bank data files. U.N. trade tapes. World Bank country documentation. Balance of The Organisation for Economic Co-operation and Development. Various years. payments, Development Co-operation. Paris. capital flows, 1986. Geographical Distribution of Financial Flows to Developing Countries. Paris. and debt IMF balance of payments data files. World Bank Debtor Reporting System. Labor force International Labour Office. Forthcoming. Labour Force Estimates and Projections, 1950-2000. 3rd ed. Geneva. International Labour Organisation tapes. World Bank data files. Population U.N. Department of International Economic and Social Affairs. Various years. Demographic Yearbook. New York. Various years. Population and Vital Statistics Report. New York. 1980. Patterns of Urban and Rural Population Growth. New York. 1982. "Infant Mortality: World Estimates and Projections, 1950-2025." Population Bulletin of the United Nations, no. 14. New York. Updated printouts. World Population Prospects as Assessed in 1982. New York. 1983. World Population Trends and Policies: 1983 Monitoring Report. New York. 1984. Recent Levels and Trends of Contraceptive Use as Assessed in 1983. New York. 1985. Estimates and Projections of Urban, Rural and City Populations, 1950-2025; The 1982 Assessment. New York. World Bank data files. Social Food and Agriculture Organization. October 1985. Food Aid Bulletin. Rome. indicators December 1983. Food Aid in Figures. Rome. 1984. Fertilizer Yearbook. 1984. Production Yearbook. 1984. Trade Yearbook. "Standard" Computer Tape. U.N. Department of International Economic and Social Affairs. Various years. Demographic Yearbook. New York. Various years. Statistical Yearbook. New York. U.N. Educational Scientific and Cultural Organization. Various years. Statistical Yearbook. Paris. World Health Organization. Various years. World Health Statistics Annual. Geneva. Various years. World Health Statistics Report, vol. 29, no. 10. Geneva. FAO and World Bank data files. 256 The World Bank World Development Report 1986 examines trade and pricing policies in world agriculture. Concern about these policies has arisen not only in the many developing countries that depend heavily on agriculture, but also in the industrial market economies whose farm support programs have become very expensive. Policies in developing and industrial countries are examined in an inte- grated framework that shows clearly the interdependence of domestic agricultural policies throughout the world and the potential for large gains from more liberal trade in agriculture. Restrictive trade policies in industrial countries impose significant costs both on their own econo- mies and on the economies of developing countries. At the same time, many developing countries have followed macroeconomic and sectoral policies that discriminate against growth in agriculture and in incomes in rural areas, where poverty, hunger, and malnutrition are most strongly concentrated. Overvalued exchange rates, heavy taxation of agricultural exports and of import-competing food crops, ineffective and high-cost producer support and price stabilization programs, inefficient parastatal marketing, and excessive protection of manufacturing sectors have all contributed to the discrimination against agriculture. Many developing countries have acknowledged the negative effects of these programs and have begun to implement policy reforms. For the world community as a whole, liberalization of trade and domestic policies is a basic priority. The Report also reviews the hesitant nature of the recovery in the world economy since the early 1980s and the serious difficulties that many developing countries continue to face. Although the recent declines in oil prices, real interest rates; and inflation will provide a useful stimulus to the world economy as a whole, many highly indebted developing countries, particularly oil exporters, will find it difficult to maintain growth in the near term. The problems of economic adjustment in sub-Saharan Africa are also far from resolution. Economic reforms in both industrial and developing countries, as well as more liberal interna- tional trade and greater net capital flows to developing countries, are required to bring about sustained growth in the world economy. ISBN 0-19-520518-9 Cover design by Joice C. Eisen JSSN 0163-5085